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Paper oil, Minsky financial instability hypothesis and casino capitalism

 Why Peak Oil Threatens the Casino Capitalism

News Peak Cheap Energy and Oil Price Slump Recommended Links The idea of Minsky moment Oil glut fallacy Neoliberalism as a New Form of Corporatism Great condensate con
Paper oil and record oil futures trading volumes Oil prices and debt bubble Slightly skeptical view of oil price forecasts        
Russia oil production Deflation of the USA shale oil bubble MSM propagated myth about Saudis defending this market share Iran return to western oil markets fearmongering

Slightly skeptical view of oil price forecasts

 

Oil consumption growth Secular Stagnation
 Energy returned on energy invested (ERoEI) Energy Geopolitics Energy Bookshelf Bakken Reality Check Junk bond bubble Energy disinformation agency and friends US military energy consumption
A note of ERoEI decline  Why Peak Oil Threatens the Casino Capitalism All wars are bankers wars Fiat money, gold and petrodollar Financial Quotes Financial Humor Etc

 

Note: This article sounds pretty counterintuitive in view of current slump of oil prices with a barrel of oil prices below $30 (more then 4 times drop from the highest level achieved.), In other words, instead of peak oil temporary the world is living in the regime of "oil glut" (which is a misnomer, as in reality this is an overproduction of condensate not oil, but at least low prices are real). 

But the key reason for this was extremely rapid increase  of production in the US and Canada in 2012-2014 fueled by cheap credit. Essentially producing "subprime oil" and in parallel the stream of junk bonds that will never be repaid (aka subprime oil as a Ponzi scheme).

At the same time this was not a revolution but a retirement party as fundamental did not change -- abundance of credit for shale oil and tar sand project was just a side effect of QE.

Reprinted from: Commentary: Why Peak Oil Threatens the International Monetary System By Erik Townsend

| January 6, 2013 (Note: Commentaries do not necessarily represent the position of ASPO-USA. )

Introduction

Having spent the last several years of my life engineering investment strategies to profit from the inevitability of Peak Oil, I’ve become obsessed with understanding the ramifications of radically different energy supply dynamics on the global economy. There are many facets to this, some obvious and some not so obvious. So when ASPO-USA Executive Director Jan Mueller approached me at the end of this year’s conference in Austin and asked for an article discussing the less obvious economic impacts of Peak Oil, I knew instantly that the topic should be the threat Peak Oil poses to the International Monetary System (IMS). This connection is critically important, but far from obvious.

I assure you that this story is very much about Peak Oil, but please bear with me, as I’ll need to start by reviewing what the IMS is and how it came about in the first place. Then I’ll explain the role energy has already played in shaping the present-day IMS, and finally, I’ll tie this back to Peak Oil by explaining why rising energy prices could very well be the catalyst that will cause the present system to fail.

What is the International Monetary System?

At the end of World War II, many countries were literally lying in ruin, and needed to be rebuilt. It was clear that international trade would be very important going forward, but how would it work? World leaders recognized the need to architect a new monetary system that would facilitate international trade and allow the world to rebuild itself following the most devastating war in world history.

A global currency was out of the question because the many countries of the world valued their sovereignty, and wanted to continue to issue their own domestic currencies. In order for international trade to flourish, a system was needed to allow trade between dozens of different nations, each with its own currency.

A convention was organized by the United Nations for the purpose of bringing world leaders together to architect this new International Monetary System. The meetings were held in July, 1944 at the Mt. Washington Hotel in Bretton Woods, New Hampshire, and were attended by 730 delegates representing all 44 allied nations. The official name for the event was the United Nations Monetary and Financial Conference, but it would forever be remembered as The Bretton Woods Conference.

To this day, the system designed in those meetings remains the basis for all international trade, and is known as the Bretton Woods System. The system has evolved quite a bit since its inception, but its core principles remain the basis for all international trade. I’m going to focus this article on the parts of the system which I believe are now at risk of radical change, with Peak Oil the most likely catalyst to bring about that change. Readers seeking a deeper understanding of the system itself should refer to the Further Reading section at the end of this article.

Why is an International Monetary System needed?

It simply wouldn’t be practical for all countries to sell their export products to other countries in their own currencies. If one had to pay for wine from France in French Francs (there was no Euro currency in 1944), and then pay to import a BMW automobile in German Marks, then pay for copper produced in Chile in Pesos, each country would face an overwhelming burden just maintaining reserve deposits of all the various world currencies. The system of trade would be very inefficient. For centuries, this problem has been solved by using a single standard currency for all international trade.

Because a standard-currency system dictates that each nation’s central bank will need to maintain a reserve supply of the standard currency in order to facilitate international trade, the standard currency is known as the reserve currency. At various times in history, the Greek Drachma, the Roman Denari, and the Islamic Dinar have served as de-facto reserve currencies. Prior to World War II, the English Pound Sterling was the international reserve currency.

Throughout history, reserve currencies came into and out of use through happenstance. The Bretton Woods conference marked the first time that a global reserve currency was established by formal treaty between cooperating nations. The currency chosen was, of course, the U.S. Dollar.

How does the IMS work?

The core of the system was the U.S. Dollar serving as the standard currency for international trade. To assure other nations of the dollar’s value, the U.S. Treasury would guarantee that other nations could convert their U.S. dollars into gold bullion at a fixed exchange rate of $35/oz. Other nations would then “peg” their currencies to the U.S. dollar at a fixed rate of exchange. Each nation’s central bank would be responsible for “defending” the official exchange rate to the U.S. dollar by offering to buy or sell any amount of currency bid or offered at that price. This meant each nation would need to keep a healthy reserve of U.S. dollars on hand to service the needs of domestic businesses wishing to convert money between the local currency and the U.S. dollar.

By design, the effect of the system was that each national currency was indirectly redeemable for gold. This was true because each nation’s central bank guaranteed convertibility of its own currency to U.S. dollars at some fixed rate of exchange, and the U.S. Treasury guaranteed convertibility of U.S. dollars to gold at a fixed rate of $35/oz. So long as all of the governments involved kept their promises, each nation’s domestic currency would be as good as gold, because it was ultimately convertible to gold. United States President Richard Nixon would break the most central promise of the entire system (U.S. dollar convertibility for gold) on August 15, 1971. I’ll come back to that event later in this article.

Triffin’s Dilemma

In 1959, three years after M. King Hubbert’s now-famous Peak Oil predictions, economist Robert Triffin would make equally prescient predictions about the sustainability of the “new” IMS, which was then only 15 years old. Sadly, Triffin’s predictions, like Hubbert’s, would be ignored by the mainstream.

The whole reason for choosing the U.S. dollar as the global reserve currency was that without a doubt, the U.S.was the world’s strongest credit in 1944. To assure confidence in the system, the strongest, most creditworthy currency on earth was chosen to serve as the standard unit of account for global trade. To eliminate any question about the value of the dollar, the system was designed so that any international holder of U.S. dollars could convert those dollars to gold bullion at a pre-determined fixed rate of exchange. Dollars were literally as good as gold.

Making the USD the world’s reserve currency created an enormous international demand for more dollars to meet each nation’s need to hold a reserve of dollars. The USA was happy to oblige by printing up more greenbacks. This provided sufficient dollars for other nations to hold as foreign exchange reserves, while at the same time allowing the U.S.to spend beyond its means without facing the same repercussions that would occur were it not the world’s reserve currency issuer.

Triffin observed that if you choose a currency because it’s a strong credit, and then give the issuing nation a financial incentive to borrow and print money recklessly without penalty, eventually that currency won’t be the strongest credit any more! This paradox came to be known as Triffin’s Dilemma.

Specifically, Triffin predicted that as issuer of the international reserve currency, the USA would be prone to over consumption, over-indebtedness, and tend toward military adventurism. Unfortunately, the U.S. Government would prove Triffin right on all three counts.

Triffin correctly predicted that the USA would eventually be forced off the gold standard. The international demand for U.S. dollars would allow the USA to create more dollars than it otherwise could have without bringing on domestic inflation. When a country creates too much of its own currency and that money stays in the country, supply-demand dynamics kick in and too much money chasing too few goods and services results in higher prices. But when a country can export its currency to other nations who have an artificial need to hold large amounts of that currency in reserve, the issuing country can create far more money than it otherwise could have, without causing a tidal wave of domestic inflation.

Nixon proves Triffin right

By 1970, the U.S.had drastically over-spent on the Vietnam War, and the number of dollars in circulation far outnumbered the amount of gold actually backing them. Other nations recognized that there wasn’t enough gold in Fort Knox for the U.S.to back all the dollars in circulation, and wisely began to exchange their excess USDs for gold. Before long, something akin to a run on the bullion bank had begun, and it became clear that the USA could not honor the $35 conversion price indefinitely.

On August 15, 1971, President Nixon did exactly what Triffin predicted more than a decade earlier: he declared force majeure, and defaulted unilaterally on the USA’s promise to honor gold conversion at $35/oz, as prescribed by the Bretton Woods accord.

Of course Nixon was not about to admit that the reason this was happening was that the U.S. Government had abused its status as reserve currency issuer and recklessly spent beyond its means. Instead, he blamed “speculators”, and announced that the United States would suspend temporarily the convertibility of the Dollar into gold. Forty-two years later, the word temporarily has taken on new meaning.

Exorbitant Privilege

With the whole world conducting international trade in U.S. dollars, nations with large export markets wound up with a big pile of U.S. dollars (payments for the goods they exported). The most obvious course of action for the foreign companies who received all those dollars as payment for their exported products would be to exchange the dollars on the international market, converting them into their own domestic currencies. What may not be obvious at first glance is that there would be catastrophic unintended consequences if they actually did that.

If all the manufacturing companies in Japan or China converted their dollar revenues back into local currency, the act of selling dollars and buying their domestic currencies would cause their own currencies to appreciate markedly against the dollar. The same holds true for oil exporting countries. If they converted all their dollar revenues back into their own currencies, doing so would make their currencies more expensive against the dollar. That would make their exports less attractive because, being priced in dollars, they would fetch lower and lower prices after being converted back into the exporting nation’s domestic currency.

The solution for the exporting nations was for their central banks to allow commercial exporters to convert their dollars for newly issued domestic currency. The central banks of exporting nations would wind up with a huge surplus of U.S. dollars they needed to invest somewhere without converting them to another currency. The obvious place to invest them was into U.S. Government Bonds.

This is the mechanism through which the reserve currency status of the dollar creates artificial demand for U.S. dollar-denominated treasury debt. That artificial demand allows the United States government to borrow money from foreigners in its own currency, something most nations cannot do at all. What’s more, this artificial demand for U.S. Treasury debt allows the USA to borrow and spend far more borrowed foreign money than it would otherwise be able to, were it not the world’s reserve currency issuer. The reason is that, if not for the artificial need to hold dollar reserves, foreign lenders would be much less inclined to purchase U.S. debt, and would therefore demand much higher interest rates. Similarly, the more that international trade has grown as a result of globalization, the more the United States’ exorbitant privilege has grown.

Have you ever wondered why China, Japan, and the oil exporting nations have such enormous U.S. Treasury bond holdings, despite the fact that they hardly pay any interest these days? The reason is definitely not because those nations think 1.6% interest on a 10-year unsecured loan to a nation known to have a reckless spending habit is a good investment. It’s because they have little other choice. The more their own economies rely on exports priced in dollars, the more they need to keep their own currencies attractively priced relative to the U.S. dollar in order for their exports to remain competitive on the international market. To achieve that outcome, they must hold large reserves denominated in U.S. dollars. That’s why China and Japan – major export economies – are the biggest foreign holders of U.S. debt.

The net effect of this system is that the USA gets to borrow money from foreigners at artificially low interest rates. Moreover, the USA can become over-indebted without the usual consequences of increasing borrowing cost and declining creditworthiness. Other nations have little choice but to maintain a large reserve supply of dollars as the international trade currency. But the U.S. has no need to maintain large reserves of other nations’ currencies, because those currencies are not used in international trade.

By the mid-1960s, this phenomenon became known as exorbitant privilege: That phrase refers to the ability of the USA to go into debt virtually for free, denominated in its own currency, when no other nation enjoys such a privilege. The phrase exorbitant privilege is often attributed to French President Charles de Gaulle, although it was actually his finance minister, Valery Giscard d’Estaing, who coined the phrase.

What’s important to understand here is that the whole reason the U.S. can get away with running trillion-dollar budget deficits without the bond market revolting (a la Greece) is because of exorbitant privilege. And that privilege is a direct consequence of the U.S. dollar serving as the world’s reserve currency. If international trade were not conducted in dollars, exporting nations (both manufacturers and oil exporters) would no longer need to hold large reserves of U.S. dollars.

Put another way, when the U.S. dollar loses its reserve currency status, the U.S. will lose its exorbitant privilege of spending beyond its means on easy credit. The U.S. Treasury bond market will most likely crash, and borrowing costs will skyrocket. Those increased borrowing costs will further exacerbate the fiscal deficit. Can you say self-reinforcing vicious cycle?

But wait… Wasn’t Gold convertibility the whole basis of the system?

If the whole point of the Bretton Woods system was to guarantee that all the currencies of the world were “as good as gold” because they were convertible to U.S. dollars, which in turn were promised to be convertible into gold… And then President Nixon broke that promise in 1971… Wouldn’t that suggest that the whole system should have blown up in reaction to Nixon slamming the gold window shut in August of ’71?

Actually, it almost did. But miraculously, the system has held together for the last 42 years, despite the fact that the most fundamental promise upon which the system was based no longer holds true. To be sure, the Arabs were not happy about Nixon’s action, and they complained loudly at the time, rhetorically asking why they should continue to accept dollars for their oil, if those dollars were not backed by anything, and might just become worthless paper. After all, if U.S. dollars were no longer convertible into gold, what value did they really have to foreigners? The slamming of the gold window by President Nixon in 1971 was not the only cause of the Arab oil embargo, but it was certainly a major influence.

What’s holding the IMS together?

Why didn’t the rest of the world abandon the dollar as the global reserve currency in reaction to the USA unilaterally reneging on gold convertibility in 1971? In my opinion, the best answer is simply “Because there was no clear alternative”. And to be sure, the unmatched power of the U.S.military had a lot to do with eliminating what might otherwise have been attractive alternatives for other nations.

U.S. diplomats made it clear to Arab leaders that they wanted the Arabs to continue pricing their oil in dollars. Not just for U.S.customers, but for the entire world. Indeed, U.S. leaders at the time understood all too well just how much benefit the USA derives from exorbitant privilege, and they weren’t about to give it up.

After a few years of tense negotiations including the infamous oil embargo, the so-called petro-dollar business cycle was born. The Arabs would only accept dollars for their oil, and they would re-invest most of their profits in U.S. Treasury debt. In exchange for this concession, they would come under the protectorate of the U.S. military. Some might even go so far as to say that the U.S. government used the infamous Mafia tactic of making the Arabs an “offer they couldn’t refuse” – forcing oil producing nations to make financial concessions in exchange for “protection”.

With the Arabs now strongly incented to continue pricing the world’s most important commodity in U.S. dollars, the Bretton Woods system lived on. No longer constrained by the threat of a run on its bullion reserves, the U.S. kicked its already-entrenched practice of borrowing and spending beyond its means into high gear. For the past 42 years, the entire world has continued to conduct virtually all international trade in Dollars. This has forced China, Japan, and the oil exporting nations to buy and hold an enormous amount of U.S. Treasury debt. Exorbitant privilege is the key economic factor that allows the U.S.to run trillion dollar fiscal deficits without crashing the Treasury bond market. So far.

There’s a limit to how long this can last

But how long can this continue? The U.S.debt-to-GDP ratio now exceeds 100%, and the U.S. has literally doubled its national debt in the last 6 years alone. It stands to reason that eventually, other nations will lose faith in the dollar and start conducting business in some other currency. In fact, that’s already started to happen, and it’s perhaps the most important, under-reported economic news story in all of history.

Some examples…China and Brazil are now conducting international trade in their own currencies, as are Russia and China. Turkey and Iran are trading oil for gold, bypassing the dollar as a reserve currency. In that case, US sanctions are a big part of the reason Iran can’t sell its oil in dollars. But I wonder if President Obama considered the undermining effect on exorbitant privilege when he imposed those sanctions. I fear that the present U.S. government doesn’t understand the importance of the dollar’s reserve currency role nearly as well as our leaders did in the 1970s.

The Biggest Risk We Face is a US Bond and Currency Crisis

To be sure, Peak Oil in general represents a monumental risk to humanity because it’s literally impossible to feed all 7+ billion people on the planet without abundant energy to run our farming equipment and distribution infrastructure. But the risks stemming directly from declining energy production are not the most imposing, in my view.

Decline rates will be gradual at first, and it will be possible, even if unpopular, to curtail unnecessary energy consumption and give priority to life-sustaining uses for the available supply of liquid fuels. In my opinion, the greatest risks posed by Peak Oil are the consequential risks. These include resource wars between nations, hoarding of scarce resources, and so forth. Chief among these consequential risks is the possibility that the Peak Oil energy crisis will be the catalyst to cause a global financial system meltdown. In my opinion, the USA losing its reserve currency status is likely to be at the heart of such a meltdown.

A good rule of thumb is that if something is unsustainable and cannot continue forever, it will not continue forever. The present incarnation of the IMS, which affords the United States the exorbitant privilege of borrowing a seemingly limitless amount of its own currency from foreigners in order to finance its reckless habit of spending beyond its means with trillion-dollar fiscal deficits, is a perfect example of an unsustainable system that cannot continue forever.

But the bigger the ship, the longer it takes to change course. The IMS is the biggest financial ship in the sea, and miraculously, it has remained afloat for 42 years after the most fundamental justification for its existence (dollar-gold convertibility) was eliminated. How long do we have before the inevitable happens, and what will be the catalyst(s) to bring about fundamental change? Those are the key questions.

In my opinion, the greatest risk to global economic stability is a sovereign debt crisis destroying the value of the world’s reserve currency. In other words, a crash of the U.S. Treasury Bond market. I believe that the loss of reserve currency status is the most likely catalyst to bring about such a crisis.

The fact that the United States’ borrowing and spending habits are unsustainable has been a topic of public discussion for decades. Older readers will recall billionaire Ross Perot exclaiming in his deep Texas accent, “A national debt of five trillion dollars is simply not sustainable!” during his 1992 Presidential campaign. Mr. Perot was right when he said that 20 years ago, but the national debt has since more than tripled. The big crisis has yet to occur. How is this possible? I believe the answer is that because the U.S. dollar is the world’s reserve currency and is perceived by institutional investors around the globe to be the world’s safest currency, it enjoys a certain degree of immunity derived from widespread complacency.

But that immunity cannot last forever. The loss of reserve currency status will be the forcing function that begins a self-reinforcing vicious cycle that brings about a U.S. bond and currency crisis. While many analysts have opined that the USA cannot go on borrowing and spending forever, relatively few have made the connection to loss of reserve currency status as the forcing function to bring about a crisis.

We’re already seeing small leaks in the ship’s hull. China openly promoting the idea that the yuan should be asserted as an alternative global reserve currency would have been unthinkable a decade ago, but is happening today. Major international trade deals (such as China and Brazil) not being denominated in US dollars would have been unthinkable a decade ago, but are happening today.

So we’re already seeing signs that the dollar’s exclusive claim on reserve currency status will be challenged. Remember, when the dollar loses reserve currency status, the U.S.loses exorbitant privilege. The deficit spending party will be over, and interest rates will explode to the upside. But to predict that this will happen right now simply because the system is unsustainable would be unwise. After all, by one important measure the system stopped making sense 42 years ago, but has somehow persisted nonetheless. The key question becomes, what will be the catalyst or proximal trigger that causes the USD to lose reserve currency status, igniting a U.S. Treasury Bond crisis?

Elevated Risk

It’s critical to understand that the USA is presently in a very precarious fiscal situation. The national debt has more than doubled in the last 10 years, but so far, there don’t seem to have been any horrific consequences. Could it be that all this talk about the national debt isn’t such a big deal after all?

The critical point to understand is that while the national debt has more than doubled, the U.S. Government’s cost of borrowing hasn’t increased at all. The reason is that interest rates are less than half what they were 10 years ago. Half the interest on twice as much principal equals the same monthly payment, so to speak. This is exactly the same trap that subprime mortgage borrowers fell into. First, money is borrowed at an artificially low interest rate. But eventually, the interest rate increases, and the cost of borrowing skyrockets. The USA is already running an unprecedented and unsustainable $1 trillion+ annual budget deficit. All it would take to double the already unsustainable deficit is for interest rates to rise to their historical norms.

This all comes back to exorbitant privilege. The only reason interest rates are so low is that the Federal Reserve is intentionally suppressing them to unprecedented low levels in an attempt to combat deflation and resuscitate the economy. The only reason the Fed has the ability to do this is that foreign lenders have an artificial need to hold dollar reserves because the USD is the global reserve currency. They would never accept such low interest rates otherwise. Loss of reserve currency status means loss of exorbitant privilege, and that in turn means the Fed would lose control of interest rates. The Fed might respond by printing even more dollars out of thin air to buy treasury bonds, but in absence of reserve currency status, doing that would cause a collapse of the dollar’s value against other currencies, making all the imported goods we now depend on unaffordable.

In summary, the U.S. Government has repeated the exact same mistake that got all those subprime mortgage borrowers into so much trouble. They are borrowing more money than they can afford to pay back, depending solely on “teaser rates” that won’t last. The U.S. Government’s average maturity of outstanding treasury debt is now barely more than 5 years. This is analogous to cash-out refinancing a 30-year fixed mortgage, replacing it with a much higher principal balance in a 3-year ARM that offers an initial teaser rate. At first, you get to borrow way more money for the same monthly payment. But eventually the rate is adjusted, and the borrower is unable to make the higher payments.

The Janszen Scenario

When it comes to evaluating the risk of a U.S. sovereign debt and currency crisis, most mainstream economists dismiss the possibility out of hand, citing the brilliant wisdom that “the authorities would never let such a thing happen”. These are the same people who were steadfastly convinced that housing prices would never crash in the United States because they never had before, and that Peak Oil is a myth because the shale gas boom solves everything (provided you don’t actually do the math).

At the opposite extreme are the bloggers on the Internet whom I refer to as the Hyperinflation Doom Squad. Their narrative generally goes something like this: Suddenly, when you least expect it, foreigners will wise up and realize that the U.S. national debt cannot be repaid in real terms, and then there will be a panic that results in a crash of the U.S. Treasury market, hyperinflation of the U.S. dollar, and declaration of martial law. This group almost always cites the hyperinflations of Zimbabwe and Argentina as “proof” of what’s going to happen in the USA any day now, but never so much as acknowledges the profound differences in circumstances between the USA and those countries. These folks deserve a little credit for having the right basic idea, but their analysis of what could actually happen simply isn’t credible when examined in detail.

Little-known economist Eric Janszen stands out as an exception. Janszen is the only credible macroeconomic analyst I’m aware of who realistically acknowledges just how real and serious the threat of a U.S. sovereign debt crisis truly is. But his analysis of that risk is based on credible, level-headed thinking complemented by solid references to legitimate economic theory such as Triffin’s Dilemma. Unlike the Doom Squad, Janszen does not rely on specious comparisons of the USA to small, systemically insignificant countries whose past financial crises have little in common with the situation the USA faces. Instead, Janszen offers refreshingly sound, well constructed arguments. Many of the concepts discussed in this article reflect Janszen’s work.

Janszen also happens to be the same guy who coined the phrase Peak Cheap Oil back in 2006, drawing an important distinction between the geological phenomenon of Hubbert’s Peak and the economic phenomenon which begins well before the actual peak, due to increasing marginal cost of production resulting from ever-increasing extraction technology complexity.

“But there’s no sign of inflation…” (Hint: It’s coming)

Janszen has put quite a bit of work into modeling what a U.S. bond and currency crisis would look like. He initially called this KaPoom Theory, because history shows that brief periods of marked deflation (the ‘Ka’) usually precede epic inflations (the ‘Poom’). He recently renamed this body of work The Janszen Scenario.

Briefly summarized, Janszen’s view is that the U.S. has reached the point where excessive borrowing and fiscal irresponsibility will eventually cause a catastrophic currency and bond crisis. He believes that all that’s needed at this point is a proximal trigger, or catalyst, to bring about such an outcome. He thinks there are several potential triggers that could bring such a crisis about, and chief among the possibilities is the next Peak Cheap Oil price spike.

How Peak Oil could cause a Bond and Currency Crisis

There are several ways that an oil price spike could trigger a U.S. bond and currency crisis. Energy is an input cost to almost everything else in the economy, so higher oil prices are very inflationary. The Fed would be hard pressed to continue denying the adverse consequences of quantitative easing in a high inflation environment, and that alone could be the spark that leads to higher treasury yields. The resulting higher cost of borrowing to finance the national debt and fiscal deficit would be devastating to the United States.

A self-reinforcing vicious cycle could easily begin in reaction to oil price-induced inflation alone. But we must also consider how an oil price shock could lead to loss of USD reserve currency status, and therefore, loss of U.S. exorbitant privilege. In the 1970s, the USA represented 80% of the global oil market. Today we represent 20%, and demand growth is projected to come primarily from emerging economies. In other words, the rationale for oil producers to keep pricing their product in dollars has seriously deteriorated since the ‘70s. The more the global price of oil goes up, the more the U.S. will source oil from Canadian tar sands and other non-OPEC sources. That means less and less incentive for the OPEC nations to continue pricing their oil in dollars for all their non-U.S. customers.

Iran and Turkey have already begun transacting oil sales in gold rather than dollars. What if the other oil exporting nations wake up one morning and conclude “Hey, why are we selling our oil for dollars that might some day not be worth anything more than the paper they’re printed on?” Oil represents a huge percentage of international trade, so if oil stopped trading in dollars, that alone would be reason for most nations to reduce the very large dollar reserves they now hold. They would start selling their U.S. treasury bonds, and that could start the vicious cycle of higher interest rates and exploding borrowing costs for the U.S. Government. The precise details are hard to predict. The point is, the system is already precarious and vulnerable, and an oil price shock could easily detonate the time bomb that’s already been ticking away for more than two decades.

What if U.S. Energy Independence claims were true?

There’s another angle here. Peak Oil just might be the catalyst to cause the loss of U.S. exorbitant privilege, even without an oil price shock.

Astute students of Peak Oil already know better than to believe the recently-popularized political rhetoric claiming that the USA will soon achieve energy independence, thanks to the shale oil and gas boom. To be sure, the Bakken, Eagle Ford, and various other U.S. oil and gas plays are a big deal. The most optimistic forecasts I’ve seen show these plays collectively ramping up to as much as 4.8 million barrels per day of production, which is equivalent to about ½ of Saudi Arabia’s current production.

But the infamous “wedge of hope” chart from the EIA projects production declines from existing global resources of 60 million barrels per day by 2030. By the most optimistic projections, all the exciting new plays in the U.S. will replace less than 5 million barrels per day. Where the other 55 million barrels per day will come from remains a mystery! And of course the politicians never bother to mention such minor details when they make predictions of energy independence.

But let’s just pretend for a moment that hyperbole is reality, and that the USA will achieve energy-independence in just a few years’ time. Now consider the consequences to the IMS. The oil-exporting nations would lose the USA as their primary export customer, and would no longer have an incentive to price their oil in dollars, or to maintain large dollar reserves. They would start selling off their U.S. treasury bonds, and pricing their oil in something other than dollars. Large oil importers like China and Japan would stop paying for oil in dollars, and would no longer need to maintain present levels of U.S. dollar reserves. So they too would start selling U.S. treasury bonds, pushing up U.S. interest rates in the process. Once again, we have the ingredients for a self-reinforcing vicious cycle of increasing U.S. interest rates causing U.S. Government borrowing costs to skyrocket.

Without the artificial demand for treasury debt created by exorbitant privilege, the U.S. would be unable to finance its federal budget deficit. The Federal Reserve might respond with even more money printing to monetize all the government’s borrowing needs, but without the international demand that results from the dollar’s reserve currency status, the dollar would crash in value relative to other currencies as a result of excessive monetization by the Fed. The resulting loss of principal value would cause even more international holders of U.S. Treasury debt to panic and sell their holdings. Once again, a self-reinforcing vicious cycle would develop, with consequences for the United States so catastrophic that the 2008 event would pale in contrast.

Rambo to the Rescue?

Let’s not forget that the USA enjoys virtually unchallenged global military hegemony. China is working hard to build out its “blue water navy”, including strategic ballistic missile nuclear submarine capability. But the USA is still top dog on the global power stage, and if the USA was willing to use its nuclear weapons, it could easily defeat any country on earth, except perhaps China and Russia.

While the use of nuclear weapons in an offensive capacity might seem unthinkable today, the USA has yet to endure significant economic hardship. $15/gallon gasoline from the next Peak Cheap Oil price shock coupled with 15% treasury yields and a government operating in crisis mode just to hold off systemic financial collapse in the face of rampant inflation would change the mood considerably.

All the USA has to do in order to secure an unlimited supply of $50/bbl imported oil is to threaten to nuke any country refusing to sell oil to the U.S. for that price. Unthinkable today, but in times of national crisis, morals are often the first thing to be forgotten. We like to tell ourselves that we would never allow economic hardship to cause us to lose our morals. But just look at the YouTube videos of riots at Wal-Mart over nothing more than contention over a limited supply of boxer shorts marked down 20% for Black Friday. What we’ll do in a true crisis that threatens our very way of life is anyone’s guess.

If faced with the choice between a Soviet-style economic collapse and abusing its military power, the USA just might resort to tactics previously thought unimaginable. Exactly what those tactics might be and how it would play out are unknowable. The point is, this is a very complex problem, and a wide array of factors including military capability will play a role in determining the ultimate outcome.

I certainly don’t mean to predict such an apocalyptic outcome. All I’m really trying to say is that the military hegemony of the USA will almost certainly play into the equation. Even if there is no actual military conflict, the ability of the U.S. to defeat almost any opponent will play into the negotiations, if nothing else.

Conclusions

The current incarnation of the International Monetary System, in which the USA enjoys the exorbitant privilege of borrowing practically for free, and is therefore able to pursue reckless fiscal policy with immunity from the adverse consequences that non-reserve currency issuing nations would experience by doing so, cannot continue indefinitely. Therefore, it will not continue indefinitely. How and when it will end is hard to say, especially considering the fact that it’s already persisted for 42 years after it stopped making sense. The system will continue to operate until some catalyst or trigger event brings about catastrophic change.

The next Peak Cheap Oil price spike is not the only possible catalyst to bring about a U.S. bond and currency crisis, but it’s the most likely candidate I’m aware of. I don’t believe that U.S. energy independence is possible, but if it were, the end of oil imports from the Middle East would also be the catalyst to end exorbitant privilege and bring about a U.S.bond and currency crisis. To summarize, the music hasn’t stopped quite yet, but when it does, this will end very, very badly. I’m pretty sure we’re on the last song, but I don’t know how long it has left to play.

Further Reading

Erik Townsend is a hedge fund manager based in Hong Kong.


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[Apr 18, 2018] Russia retaliate Our Response to US Sanctions Will Be Precise And Painful

Apr 18, 2018 | community.oilprice.com

luckysoul777

Report post " What exactly do we get from Russian that we couldn't do without? " <== The willingness to ally with the U.S. vs the Chinese.

There is no denial of what Russia has done in the last few years, and it's wrong! However, what is entirely missing from the western media is the U.S. ambassador to the USSR, Jack Matlock, and George Kennan have been warning the American political elites since the 90's, prior to Putin was even known and in politics, that the American foreign policy is steering us straight into confrontations with Russia! It's not if but when it will happen REGARDLESS OF who is in Kremlin! Nobody cared to heed because we were indulging ourselves as the sole superpower in the world.

Neither has the American media reported even our old friend, Gorbachev, is praising Putin and has harsh words for the U.S. In a nutshell, the Russians don't like to be treated as a nobody country, ie. with decisions of world affairs already made and shoved at their face, and they can either put up or shut up! However, that is exactly how Washington has conducted business with Russia until the crisis in Ukraine in 2014. Would the American public put up with a revolution led by a Russian politician in Mexico City or Ottawa, even though it's Mexican or Canadians self-determination? Then what makes us think the Russians would tolerate John McCain leading an anti-Russian revolution in Kiev, even if it's Ukrainian self-determination? Don't forget the U.S. directly invaded Grenada when they were exercising their self-determination to ally with the USSR!

This is not about defending Russia. The Russians can take care of that themselves. Rather, can the U.S. afford to have Russia and China solidify their alliance again? It's already happening unless we can adopt a sensible Russian policy to turn it around. Who would you rather ally with? Someone (like the U.S.) who expects you to be a subordinate vs another (like China) who is willing to treat you as an equal?

One can certainly argue how it is possible to ally with a country like Russia, who sponsors dictators, meddles in our elections and tramples on other nation's self-determination. If you are willing to be honest with yourself, just Google it. There is not one thing we accuse of the Russians that our politicians are not doing it overseas, by MULTIPLE magnitude! The biggest gripe the Russians have toward the U.S. is "are you preaching democracy or hypocrisy?" Yes, one sin doesn't justify another, but why our politicians can't uphold this principle when they are committing treacheries overseas?

[Apr 13, 2018] Live updates Syria under military attack on Trump's orders

Notable quotes:
"... People think this is about Syria, it is not. It's about oil price. Watch on Monday and the days following oil price will rocket up, and Iran, Russia, US will all be celebrating privately. The Chinese stock market will fall because oil will cost them more. ..."
Apr 13, 2018 | www.presstv.com

Syrian state TV said that the attack hit the country's army depots in the area of Homs, Reuters reported.

A Reuters witness said that at least six loud explosions were heard in Damascus with smoke rising over the Syrian capital where a second witness said the Barzah district, the location of a major Syrian scientific research center, was also hit in the strikes.

Meanwhile, Syrian state television reported that "Syrian air defense blocks American, British, French aggression on Syria." It added that 13 missiles were shot down.

The US has been threatening Damascus with military action since April 7, when a suspected chemical attack on the Syrian town of Douma, Eastern Ghouta, reportedly killed 60 people and injured hundreds more. The Syrian government has already strongly denied using chemical munitions in the flashpoint town.

Joe ,

People think this is about Syria, it is not. It's about oil price. Watch on Monday and the days following oil price will rocket up, and Iran, Russia, US will all be celebrating privately. The Chinese stock market will fall because oil will cost them more.

[Mar 29, 2018] "The objectives of these US actions as the labelling of China as a "strategic competitor" suggests, is it to halt China's technological progress altogether

China's rise has made the US fear the loss of its role as the sole superpower. And the neoliberal elite fights back. That replays on a new level rift of the USSR and China in the past.
Mar 29, 2018 | www.ft.com

Martin Wolf : How China can avoid a trade war with the US

... the plan to impose 25 per cent tariffs on $60bn of (as yet, unspecified) Chinese exports to the US shows the aggression of Mr Trump's trade agenda. The proposed tariffs are just one of several actions aimed at China's technology-related policies. These include a case against China at the World Trade Organization and a plan to impose new restrictions on its investments in US technology companies.

The objectives of these US actions are unclear. Is it merely to halt alleged misbehaviour, such as forced transfers -- or outright theft -- of intellectual property? Or, as the labelling of China as a "strategic competitor" suggests, is it to halt China's technological progress altogether -- an aim that is unachievable and certainly non-negotiable. Mr Trump also emphasised the need for China to slash its US bilateral trade surplus by $100bn. Indeed, his rhetoric implies that trade should balance with each partner. This aim is, once again, neither achievable nor negotiable.

...A still more pessimistic view is that trade discussions will break down in a cycle of retaliation, perhaps as part of broader hostilities.

[Mar 09, 2018] Is US Energy Dominance Overhyped Top Experts Doubts Claims About Future Net Energy Exports naked capitalism

Notable quotes:
"... By Gary North, Oilprice.com's South-East Asia & Pacific correspondent. He writes about energy matters, geopolitics and international financial markets. Originally published at OilPrice ..."
"... A more conservative rate of growth may simply be desired by some, but it also may be an inevitability. Kevin Holt, chief investment officer of Invesco's U.S. value equities has said that the situation many companies find themselves in is in part a consequence of the link between their leaders' pay and production growth, rather than returns on investment. ..."
"... Ultimately the market is subject to myriad pressures, such as the heterogeneous quality of oil, fluctuations in labor costs and oil prices, as well as changes in the pace of technological development. These pressures shape the nature of the market, and also make it difficult to predict the longevity of tight oil reserves, and the ability of companies to exploit them. Another significant factor is regulation. How long will Trump's EPA remain the castrated shadow of its former self, and how long until it begins to bare its own teeth? ..."
"... The US might produce 11 million bpd of oil and condensates, but it still consumes nearly 20 million bpd. So, while the US might become a large exporter, it will be a large net importer. I don't see how shale or fantasy oil fields offshore Florida or in the ANWR will add 21 million bdp of production which would allow the US to be a net 12 million exporter. And by 2023? This must have been a typo. ..."
"... "The US might produce 11 million bpd of oil and condensates, but it still consumes nearly 20 million bpd." Exactly. The US is going to be a net exporter .and a net importer . of the same thing. And people accept this. We are leaving the Orwellian Age behind, and entering the Age of Insanity. ..."
"... Has anybody worked out how many years it will be until those particular shale formations have been sucked dry? The article mentioned that some formations had already been run dry. This somehow smacks to me of trying to keep the age of cheap oil going a little bit longer. ..."
"... Yes, most of the increase in oil comes from oil shale. Unlike a conventional oil well, shale extraction means a constant process of fracking (driving a hydraulic fluid into the geology to release light oil and gas trapped in the rock pores), so its much harder to assess the long term viability of a reserve than with a conventional well, which is usually an oil filled underground void with a measurable capacity. The typical production life of a single 'frack' is around 9 months or so, although a single well can be fracked multiple times if the geology is right. ..."
"... Ditto Genscape.com regarding overall supply-demand factors. Not a subscriber nor do I regularly follow sector developments, but big inventory drawdowns at Cushing, OK terminal over the past four months are puzzling in the face of rising EIA oil production data. ..."
"... Slow us expansion and the next recession, which might rival the last one because private sector debt, will push price sub 40. But majors have cut back exploration for some time, OPEC and Russia maybe in decline, and conversion to electrical cars minimal I'm guessing new price record in five years. ..."
"... The weird thing about shale is it unites the power of the financial lobby who finance the drilling with the power of the oil barons who control the market – that gives it 'umph' in the capitalist world. ..."
Mar 09, 2018 | www.nakedcapitalism.com

Yves here. The US seems overeager to be exceptional.

By Gary North, Oilprice.com's South-East Asia & Pacific correspondent. He writes about energy matters, geopolitics and international financial markets. Originally published at OilPrice

U.S. shale has effectively upended the oil industry, with predictions that total U.S. oil production will surpass Saudi Arabia's output this year, in turn rivalling Russia's to become the preeminent global producer. From its position of being dependent on, and subordinate to OPEC, the U.S. has seemingly become the big bad wolf. Through a catalogue of tactical errors and misplaced belief in its own muscle, the mighty brick edifice of OPEC has begun to look more like a bundle of sticks.

The International Energy Agency (IEA) forecasts that the U.S. will become a net energy exporter by the late 2020s, but how accurate is that forecast, and to what extent is it mere hyperbole? In October last year there were already caveats about the nature of U.S. shale, with some warning that aggressive expansion was leading to rapid initial growth that would ultimately peak too soon. Mark Papa, former head of EOG Resources (NYSE: EOG) raised the question of flatlining output in the face of the doubling of the oil rig count, "(h)ow can a rig count be double and yet production be stagnant?"

Figures have also been influenced by the rapid pace of technological development, a pace which has itself plateaued. Robert Clarke, WoodMac research director for Lower 48 upstream, said that "(i)f future wells are not offset by continued technology evolution, the Permian may peak in 2021". IEA forecasts then, may be based on rapid growth and technological development that simply isn't sustainable. Related: Shell Outsmarts Competition In The Gulf Of Mexico

Is U.S. shale just a sheep in wolf's clothing, its bite ultimately as benign as grandma's? The IEA is still forecasting that the U.S. will be the number one oil exporter by 2023 at 12.1 million bpd, but at the CERAWeek Conference in Houston on Tuesday, Papa is set to turn that thinking on its head when he warns the industry that shale will hit roadblocks that prevent such forecasts from being realized. He says the best drilling locations in North Dakota and South Texas are already tapped out. "The oil market is in a state of misdirection now," Papa told the WSJ. "Someone needs to speak out."

How much of this is indeed misdirection on his part? Papa is CEO at Centennial Resource Development (NASDAQ: CDEV), which holds the rights to 77,000 acres in the oil-rich Delaware sub-basin of the Permian. A slowdown in expansion and its potential consequence of increased oil prices is advantageous to Centennial's shareholders, so who are we to believe guilty of misdirection?

A more conservative rate of growth may simply be desired by some, but it also may be an inevitability. Kevin Holt, chief investment officer of Invesco's U.S. value equities has said that the situation many companies find themselves in is in part a consequence of the link between their leaders' pay and production growth, rather than returns on investment. This has fostered a drilling frenzy that has resulted in an explosion of production – an unregulated drilling frenzy that may be at odds with the long term survival of those companies. Investors have subsequently demanded a more conservative approach to drilling, which appears to be having a stabilizing effect.

Ultimately the market is subject to myriad pressures, such as the heterogeneous quality of oil, fluctuations in labor costs and oil prices, as well as changes in the pace of technological development. These pressures shape the nature of the market, and also make it difficult to predict the longevity of tight oil reserves, and the ability of companies to exploit them. Another significant factor is regulation. How long will Trump's EPA remain the castrated shadow of its former self, and how long until it begins to bare its own teeth?

Is Papa's anticipated warning about to shake up the industry? Or is it merely the continuation of the chorus of restraint that many in the industry have been voicing in this period of massive growth and upheaval? Ultimately the industry will decide whether it will be eating out of Papa's hand, or persist in biting the hand that feeds it.


Expat , March 7, 2018 at 7:58 am

The US might produce 11 million bpd of oil and condensates, but it still consumes nearly 20 million bpd. So, while the US might become a large exporter, it will be a large net importer. I don't see how shale or fantasy oil fields offshore Florida or in the ANWR will add 21 million bdp of production which would allow the US to be a net 12 million exporter. And by 2023? This must have been a typo.

In any case, without a major transition away from internal combustion engines and heating oil, the US will not be a net export any time soon.

As for shale, while the technology is improving, the rig counts show the true story. US production is not expanding in line with rigs, nowhere near it. Shale is not Ghawar and never will be.

Max4241 , March 7, 2018 at 9:21 pm

"The US might produce 11 million bpd of oil and condensates, but it still consumes nearly 20 million bpd." Exactly. The US is going to be a net exporter .and a net importer . of the same thing. And people accept this. We are leaving the Orwellian Age behind, and entering the Age of Insanity.

The Rev Kev , March 7, 2018 at 8:17 am

I'm probably going to get smacked down on this but all the oil that the US is pushing out comes from those shale formations, don't they? But they are not like oil wells which you can keep pumping for decades but are more about sucking all the loose stuff that you can out of geological formations. And they deplete – rapidly!

Has anybody worked out how many years it will be until those particular shale formations have been sucked dry? The article mentioned that some formations had already been run dry. This somehow smacks to me of trying to keep the age of cheap oil going a little bit longer.

PlutoniumKun , March 7, 2018 at 9:12 am

Yes, most of the increase in oil comes from oil shale. Unlike a conventional oil well, shale extraction means a constant process of fracking (driving a hydraulic fluid into the geology to release light oil and gas trapped in the rock pores), so its much harder to assess the long term viability of a reserve than with a conventional well, which is usually an oil filled underground void with a measurable capacity. The typical production life of a single 'frack' is around 9 months or so, although a single well can be fracked multiple times if the geology is right.

If you google the geologist Arthur Berman, you'll find many of his articles on the topic. He's long been something of a fly in the ointment for the trade, as he has argued that extrapolations based on early explorations are likely to be too optimistic, as the industry is aiming for 'sweet spots', which will provide very good flows, but not a good indication of longer term potential. He has also pointed out (which is not denied in the industry), that unless new technologies are developed, the 'drop off' from peak production will be a much sharper decline than from a conventional oil field, as there will come a point where repeated fracking is not economically viable.

So nobody ultimately really knows – if you believe the industry, better and cheaper techniques will allow fracking to extend outwards from known sweet spots to extend over the truly vast expanse of oil and gas shales that run from Texas up to Pennsylvania and New York state. The pessimists (who tend to include most oil geologists) say that the extractable oil is already getting worked, and the point of unviability will come very quickly, and there will be a very rapid drop-off. Only time will tell.

Another point worth making is that oil is not as fungible a product as is often assumed. Shale oil is known as 'tight oil – its very light, but there are only very limited numbers of refineries that can deal with it. This is why it goes hand in hand with the use of heavier grades to mix in, so it can be refined in existing facilities which are designed usually for Gulf of Mexico or Alaskan crudes. This oil is mostly Venezuelan heavy crude or Canadian oil sands product. So there is a sort of dance going on between these products to ensure tight oils viability. Its notable that so far as I've seen, nobody seems willing to invest in tight oil refineries, which to me suggests the industry is not optimistic about its long term potential.

Scott , March 7, 2018 at 12:13 pm

Three years ago, a new refinery opened in North Dakota. A year later it sold for a loss http://www.thedickinsonpress.com/business/energy-and-mining/4063779-dakota-prairie-refinery-sold-tesoro-loss-hurt-oil-price-slump

The primary reason was the collapse of oil prices and the associated decreased demand for diesel.

Synoia , March 7, 2018 at 1:00 pm

Another point worth making is that oil is not as fungible a product as is often assumed

Very true. Refineries have to be "tuned" for a specif type of oil. Most refineries can only process oil from a single origin, and change of origin requires expensive, slow changes, made reluctantly.

Why reluctant to change? Construction in refineries is dangerous.

Amfortas the Hippie , March 7, 2018 at 7:07 pm

Yup. Fracking means scraping the dregs out of spent fields. Permian Basin(which I've seen touted as the "new saudi arabia", lately) peaked in like 72 or 73. all over that part of texas are rusty pumpjacks, idle until the oil price gets rather high(Bush Darkness, they started running again) These are marginal wells, at best, without extraordinary measures(like fracking what they used to call bottle-brushing*).

Oil is finite which means that at some point it will no longer be worth it to get it out of the ground(EROEI). Ergo, these big plays that will "make us energy independent" are flashes in the pan.

(* my dad used to fish with a guy who did bottle brushing for saudi aramco, circa late 80's, apparently a rare skill at the time. he said back then that they were gonna run out, because you don't do that to healthy(sic) fields. )

rjs , March 7, 2018 at 9:29 am

looking at the actual numbers involved might help

natural gas imports, mostly from Canada: https://www.eia.gov/dnav/ng/hist/n9100us2m.htm
natural gas exports, still mostly to Mexico: https://www.eia.gov/dnav/ng/hist/n9130us2m.htm
oil imports: http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRIMUS2&f=W
oil exports: https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCREXUS2&f=W

Anand shah , March 7, 2018 at 11:27 am

https://peakprosperity.com has been behind shale oil production issues for the last decade and has published blogs / podcasts, interviewed experts, etc

Some articles are behind a paywall, but it is a very good source

Chauncey Gardiner , March 7, 2018 at 7:12 pm

Ditto Genscape.com regarding overall supply-demand factors. Not a subscriber nor do I regularly follow sector developments, but big inventory drawdowns at Cushing, OK terminal over the past four months are puzzling in the face of rising EIA oil production data. Exports?

Read that OPEC representatives are meeting with US in Houston this week.

John k , March 7, 2018 at 11:59 am

Slow us expansion and the next recession, which might rival the last one because private sector debt, will push price sub 40.
But majors have cut back exploration for some time, OPEC and Russia maybe in decline, and conversion to electrical cars minimal I'm guessing new price record in five years.

RBHoughton , March 7, 2018 at 8:38 pm

The weird thing about shale is it unites the power of the financial lobby who finance the drilling with the power of the oil barons who control the market – that gives it 'umph' in the capitalist world.

My particular fear for America is that the entire country except the east and west coasts are approved for fracking. An important part of national food production comes from states like Kansas which use aquifer water entirely. If the farmers pump oil-flavored water on their fields it will have an effect on the harvests. In profiting one way, the country sustains a loss in another.

[Feb 23, 2018] What Is The Right Price For Oil In A Balanced Market OilPrice.com

Notable quotes:
"... "What is the Right Price for oil in a balanced market?" ..."
Feb 23, 2018 | oilprice.com

What Is The Right Price For Oil In A Balanced Market? By Dan Steffens - Feb 21, 2018, 6:00 PM CST fracking crew The price of oil is well off the low for this cycle because the OPEC + Russia plan to rebalance supply & demand has worked. Now the question is "What is the Right Price for oil in a balanced market?"

(Click to enlarge)

The price of West Texas Intermediate (WTI) crude oil, like the stock market, was overdue for a bit of a pullback or "correction". After peaking at over $66/bbl on January 26, 2018 the front month NYMEX contract for WTI followed the stock market correction down to just above $59/bbl on February 13. By the close on February 16 it had rebounded back to $61.55/bbl. The fact that a key resistance level at $57.65 was not tested during the selloff is encouraging.

WTI has been moving in a strong upward channel since last summer. Right now there is strong support at $57.65 and strong resistance at $66.70. A close above $67.00 should set up a test of $75.00 sometime in the 3rd quarter. At least that's what the "tea leaves" are telling me.

In my opinion, there are several "myths" or "false paradigms" that are holding down the price of oil.

Myth #1: U.S. Tight Oil production can meet the world's future demand for oil.

U.S. oil production is on the rise. There is no doubt that vast improvements in horizontal drilling technology and completion methods have made harvesting oil from shale and other tight zones possible. U.S. oil production now exceeds 10,000,000 barrels per day; a level no one in the industry believed was possible at the turn of the century. However, U.S. tight oil production is still only 5% of the global oil supply. It is highly unlikely that U.S. oil production will be able to ever meet U.S. demand (currently over 17,000,000 barrels per day), much less supply the rest of the world.

Myth #2: All Shale Leasehold is the same.

The Permian Basin covers 19 million acres, however only a small percentage of the leasehold is considered "Tier One" for shale oil recovery. Upstream companies are rapidly drilling up their best acreage, a process called "High Grading". Once they have drilled out the Tier One locations, it will be extremely difficult to maintain the pace of production growth that we have seen recently.

Adding to the problem is the fact that horizontal wells are completed with massive frac jobs, which enable the wells to have very strong initial production rates. Initial production ("IP") rates are unsustainable. After the initial surge, production declines rapidly in all horizontal wells. In most areas, production declines by more than 50% from the IP rate within a year. After three years, most horizontal shale wells are producing less than 10% of their "IP Rate". Related: The U.S. Oil Industry Sets Its Sights On Asia

From a well-level economic standpoint this is great since the wells payout quickly. However, we now have 100s of thousands of high decline rate horizontal wells online and another 20,000 new shale wells will be completed this year. Soon after the Tier One areas are developed, it will be mathematically impossible to drill enough Tier Two wells to maintain production growth. Most people that I talk to think the Bakken Shale and the Eagle Ford Shale have already seen their peak production. Myth #3: All oil is the same.

This is really more of a common misunderstanding than a myth. The oil being extracted from shale and other tight formations has very high API gravity (over 40 degrees). To a point this was good news, but now we are producing so much "Light Oil" that our refineries cannot handle all of it. This is one reason that the U.S. is now exporting more oil and why Brent oil trades at about a $4.00/bbl premium to WTI. Per the most recent U.S. Energy Information Administration's ("EIA") weekly report, over the last six weeks ending February 9, 2018 the U.S.:

• Produced 9,926,800 barrels of crude oil per day
• Imported 7,976,500 barrels of crude oil per day (mostly heavy oil)
• Exported 1,341,500 barrels of crude oil per day (all light oil)
• Exported 4,885,000 barrels of refined products per day

I am expecting the problem of too much light oil production to get more press coverage this summer because (a) it takes more crude oil to produce summer blend gasolines & diesel and (b) there is a limit to how much light oil we can export.

Myth #4: We no longer need conventional exploration.

You could argue that this is the same as Myth #1. The thinking among investors is why waste capital on exploration in remote areas or on high risk drilling like deep water prospects when shale can produce all the oil we will ever need? The truth is that Non-OPEC / Non-U.S. oil accounts for over 45% of this world's crude oil supply and it is now at risk of going on steady decline because so little capital has been deployed in these "Other Areas". With demand for oil now increasing by 1.5 to 2.0 million barrels per day year-after-year, we are going to need lots of new supply outside of the shales.

Myth #5: OPEC and Russia can flood the market with oil whenever they feel like it.

• First of all it would be incredibly stupid for the cartel members to over produce again since they were the ones that suffered the most during the recent oil price collapse.
• Second, OPEC may actually have very little production capacity beyond what they are producing today.

In the International Energy Agency's most recent " Oil Market Report " that was published on February 13, 2018 it was reported that OPEC members were 137% in compliance with their production agreement and the Russian lead Non-OPEC group was 85% in compliance with their agreement. In my opinion, the real reason that OPEC is holding down production is because they can't produce much more oil than they are producing today. Regardless of the reason, this one is a fear that should not keep investors up at night. Related: Frac Sand Shortage Threatens Shale Boom

If you're considering investing in the Saudi Aramco IPO later this year, you may want to think about the paragrap:above.

One of my friends with decades of oil & gas industry experience sent me this note: "I attended an energy conference in Houston last year and the speaker from Tudor Pickering Holt & Co. (a highly respected energy investment & banking firm) made this comment:"

"When oil was over $100/bbl, did any new production come on in OPEC or Russia? The only area that saw a significant increase in oil production was North America. No other geologic province increased production. That tells you that if it were there, it would have been brought on to produce during a period of $100 + oil. It is the belief of TPH that any production outside of North America and big offshore projects requiring years to develop do not exist".

I'm sure there are many industry experts that believe there are massive recoverable oil reserves out there, but TPH's comment does give one pause.

Myth #6: Electric Vehicles and Renewables will soon slow oil consumption.

There is no evidence that this is going to happen anytime soon. The "Millennials", defined as persons reaching adulthood in the early 21st century, have been brainwashed to believe we'd be better off without hydrocarbon based fuels and feedstock. Nothing could be further from the truth, but that is a subject for another time. Millennials believe that all educated people will be driving electric cars within a few years. They never pause to think about where all the rechargeable battery materials will come from or the massive changes that will be required to the power grid.

If you are over 30, you may recall that biofuels were going to cause oil demand to go down. It never happened.

We are going to see more electric vehicles in the future, but they won't make a dent in gasoline and diesel demand for at least another decade. Wind and solar generate electricity and therefore are more of a threat to coal, but they still cannot compete with gas fired power plants.

Like it or not, this world runs on oil. Nothing can come close to the energy density of gasoline & diesel and they are still relatively cheap compare to other transportation fuels.

(Click to enlarge)

Fact: In April, demand for crude oil is expect to spike by over 2.0 million barrels per day.

In 2017, demand for oil increased by 2.3 million barrels per day from the first to the second quarter. Last year, U.S. crude oil inventories were at the top of the five year range. Today, U.S. crude oil inventories are in the middle of the five year range. Facts eventually top Myths.

Some statistics in the IEA's Oil Market Report that should have raised a few more eyebrows:

• Global oil supply in January edged lower to 97,700,000 barrels per day. Compare this to global demand that IEA forecasts will exceed 100,000,000 barrels per day by the 4th quarter.
• IEA's oil demand growth forecast for 2018 was raised to 1,400,000 barrels per day. In my opinion, when the actual data is in for 2018, demand will have gone up by over 2,000,000 barrels per day. Global GDP growth estimates just keep going up and GDP growth is the primary driver of oil demand.
• OECD commercial stocks (crude oil and refined products) fell in December by 55,600,000 barrels, the steepest drop in over seven years. OECD stocks are now 2,851 million barrels, which is way below "glut" level.

My prediction: When the U.S. refinery maintenance season is over in March, supply/demand statistics are going to turn VERY BULLISH for oil in April.

By Dan Steffens for Oilprice.com

[Feb 23, 2018] At 100 plus dollar per barrel shale oil might work. Just a big risk.

Feb 23, 2018 | peakoilbarrel.com

Mike x Ignored says: 02/21/2018 at 4:56 pm

The increase in well productivity comes with a higher cost tag and whether it is 225 or 250K BO EUR, at a gross WH price of $60 per barrel and a net back price of $30, those kinds of estimated UR's are barely (in)sufficient to pay out $7.5M well costs. One cannot replace reserve inventories that are declining precipitously, much less grow reserves, by breaking even. It is, in my opinion, a mistake to assume the future of unconventional shale oil resources in our country is strictly price dependent. It is very much money dependent.

I think one of the primary reasons there are any rigs still running in the EF is to comply with SEC, 5 year, drill-it-or-lose-it rules for proximity related PUD reserves. If you have borrowed money on PUD reserves and are about ready to have to impair, again, because you are running out of time, you are up Shit Creek. Or further up Shit Creek than you already were. Otherwise, I don't know why anyone is drilling Eagle Ford wells anymore unless they know, guaranteed, the price of oil is going to $85 and will STAY there.

shallow sand x Ignored says: 02/21/2018 at 7:55 pm
Just thinking about all these stripper horizontal wells gives me LOE nightmares.

A major expense being downhole failures, doesn't it make practical sense that these wells will be very high cost? Over 10,000' of rods rubbing up and down against 10,000' of tubing, and in particular in beginning of the "curve" where the down hole pump apparently must sit in order to keep from pumping off.

We have wells that haven't been pulled in years, but those are slow pumping verticals that are very shallow. Many drilled with a cable tool. Straight holes, little rod wear.

I just cannot imagine getting a long run without a failure on these hz wells with a 640 Lufkin pounding away 24/7/365.

Mike x Ignored says: 02/21/2018 at 8:14 pm
I drove by 33 Eagle Ford shale oil wells today, Shallow; did a little windshield poll. Twenty one of them were down. Or on pump-off controls. Either way, they weren't making money. Might be they were all WOR; everybody has fled S. Texas for points West. Hauling frac sand can now make you upper middle class in less than 6 months.

Rod lifting those kinds of wells you describe been there, done that. It sucks. Steal one in a garage sale, or off eBay and for a while you think you hit a big lick. Then along comes a $135K well intervention that takes 2 years to payout and you wish you'd become a landscape engineer (lawnmower) instead.

Eulenspiegel x Ignored says: 02/22/2018 at 4:38 am
So it looks like shale oil is all about getting as much as you can in the first 3 years – the rest is pure luck before equipment breaks down?
shallow sand x Ignored says: 02/22/2018 at 6:35 am
All wells on rod lift eventually will have down hole failures. When wells fail often, or are low oil volume, they may become uneconomic to produce.

From what I have seen from actual joint interest statements to non-operated working interest owners, it costs between $3,000-$20,000 per month to operate a shale oil well. Much of the expense depends upon how much water is produced with the oil. Almost all produced water is truck hauled. Water disposal systems are being constructed, but those are very expensive.

The $$ figure I cite does not include repairs of down hole failures such as pump failures or tubing leaks. About the cheapest downhole repair I have seen for one of these wells was $15,000. The highest I have seen was almost $500,000.

EUR estimates for these wells are for a 40-50 year well life. Much of that life the well will produce under 25 BOPD. Most of the wells in TX are burdened with a 1/4 royalty.

So, just for illustrative purposes, let's say a 5 year old EFS in TX is now producing 6,000 net BO to the working interest owners. At $50 WTI it is providing gross income of $300,000. By the time we subtract LOE, G & A, and severance taxes, there is likely less than $100,000 left.

Then, realize many shale companies, to raise money, have sold their gathering systems, something which kind of astonished me at first. Therefore, the working interest owners are also paying to use those systems. Even less $$ to the bottom line.

So, as Mike says, it just becomes a gamble on how many down hole failures occur. If you luck out and have none in the year, you might make a little at $50 oil, more than one per year and you have likely lost $$.

There will be several hundred thousand of these wells onshore US before it is over. Each with a plugging and abandonment cost of around $250K estimated.

But, at $100+ oil, these might work. Just a big risk.

[Feb 23, 2018] U.S. Vastly Overstates Oil Output Forecasts, MIT Study Suggests

Feb 23, 2018 | peakoilbarrel.com

Hightrekker

x Ignored says: 02/22/2018 at 3:32 pm
Well, they are academics, so we can discount this a bit:

U.S. Vastly Overstates Oil Output Forecasts, MIT Study Suggests
https://www.bloomberg.com/news/articles/2017-12-01/mit-study-suggests-u-s-vastly-overstates-oil-output-forecasts

[Feb 20, 2018] For the life of me I cannot figure why Americans want a war/conflict with Russia

Highly recommended!
This post summaries several "alternative" views that many suspect, but can't express as clearly as here.
Feb 20, 2018 | www.moonofalabama.org

Palloy | Feb 20, 2018 8:52:02 PM | 34

@4 "For the life of me I cannot figure why Americans want a war/conflict with Russia."

Ever since US Crude Oil peaked its production in 1970, the US has known that at some point the oil majors would have their profitability damaged, "assets" downgraded, and borrowing capacity destroyed. At this point their shares would become worthless and they would become bankrupt. The contagion from this would spread to transport businesses, plastics manufacture, herbicides and pesticide production and a total collapse of Industrial Civilisation.

In anticipation of increasing Crude Oil imports, Nixon stopped the convertibility of Dollars into Gold, thus making the Dollar entirely fiat, allowing them to print as much of the currency as they needed.

They also began a system of obscuring oil production data, involving the DoE's EIA and the OECD's IEA, by inventing an ever-increasing category of Undiscovered Oilfields in their predictions, and combining Crude Oil and Condensate (from gas fields) into one category (C+C) as if they were the same thing. As well the support of the ethanol-from-corn industry began, even though it was uneconomic. The Global Warming problem had to be debunked, despite its sound scientific basis. Energy-intensive manufacturing work was off-shored to cheap labour+energy countries, and Just-in-Time delivery systems were honed.

In 2004 the price of Crude Oil rose from $28 /barrel up to $143 /b in mid-2008. This demonstrated that there is a limit to how much business can pay for oil (around $100 /b). Fracking became marginally economic at these prices, but the frackers never made a profit as over-production meant prices fell to about $60 /b. The Government encourages this destructive industry despite the fact it doesn't make any money, because the alternative is the end of Industrial Civilisation.

Eventually though, there must come a time when there is not enough oil to power all the cars and trucks, bulldozers, farm tractors, airplanes and ships, as well as manufacture all the wind turbines and solar panels and electric vehicles, as well as the upgraded transmission grid. At that point, the game will be up, and it will be time for WW3. So we need to line up some really big enemies, and develop lots of reasons to hate them.

Thus you see the demonisation of Russia, China, Iran and Venezuela for reasons that don't make sense from a normal perspective.

[Feb 16, 2018] The big news is the Russian offer to the Saudi authorities to invest directly in the upcoming Aramco initial public offering

Feb 16, 2018 | consortiumnews.com

Mild-ly -Facetious , February 16, 2018 at 5:42 pm

F Y I :> Putin prefers Aramco to Trump's sword dance

Hardly 10 months after honoring the visiting US president, the Saudis are open to a Russian-Chinese consortium investing in the upcoming Aramco IPO

By M.K. BHADRAKUMAR
FEBRUARY 16, 2018

[extract]

In the slideshow that is Middle Eastern politics, the series of still images seldom add up to make an enduring narrative. And the probability is high that when an indelible image appears, it might go unnoticed -- such as Russia and Saudi Arabia wrapping up huge energy deals on Wednesday underscoring a new narrative in regional and international security.

The ebb and flow of events in Syria -- Turkey's campaign in Afrin and its threat to administer an "Ottoman slap" to the United States, and the shooting down of an Israeli F-16 jet -- hogged the attention. But something of far greater importance was unfolding in Riyadh, as Saudi and Russian officials met to seal major deals marking a historic challenge to the US dominance in the Persian Gulf region.

The big news is the Russian offer to the Saudi authorities to invest directly in the upcoming Aramco initial public offering -- and the Saudis acknowledging the offer. Even bigger news, surely, is that Moscow is putting together a Russian-Chinese consortium of joint investment funds plus several major Russian banks to be part of the Aramco IPO.

Chinese state oil companies were interested in becoming cornerstone investors in the IPO, but the participation of a Russia-China joint investment fund takes matters to an entirely different realm. Clearly, the Chinese side is willing to hand over tens of billions of dollars.

Yet the Aramco IPO was a prime motive for US President Donald Trump to choose Saudi Arabia for his first foreign trip. The Saudi hosts extended the ultimate honor to Trump -- a ceremonial sword dance outside the Murabba Palace in Riyadh. Hardly 10 months later, they are open to a Russian-Chinese consortium investing in the Aramco IPO.

Riyadh plans to sell 5% of Saudi Aramco in what is billed as the largest IPO in world history. In the Saudi estimation, Aramco is worth US$2 trillion; a 5% stake sale could fetch as much as $100 billion. The IPO is a crucial segment of Vision 2030, Saudi Crown Prince Mohammad bin Salman's ambitious plan to diversify the kingdom's economy.

MORE : http://www.atimes.com/article/putin-prefers-aramco-trumps-sword-dance/

[Feb 03, 2018] JP Morgan Oil Could Hit $78 Within Months

Highly recommended!
Feb 03, 2018 | oilprice.com

J.P. Morgan beat all other investment banks in their forecasts for the price of Brent crude this year, setting its projection at US$70 a barrel. To compare, the second most bullish forecast on Brent is from Bank of America at US$64 a barrel, while Goldman is even more cautious and has not yet upgraded its Brent price forecast from its US$62 a barrel prediction.

J.P. Morgan's reasoning is the same as the other banks': the global economy will continue to expand, which will stimulate growth in oil demand and healthy prices. This dynamic will also drive WTI prices higher, with the average for the year seen at US$65.63 a barrel by J.P. Morgan's oil analysts.

Despite the upbeat mood, the investment bank's analysts do recognize the danger of growing U.S. and other non-OPEC production. So, while their price forecasts are for the average level of Brent and WTI this year, the bank's senior oil analyst Abhishek Deshpande noted in an interview with CNBC that "This 2018 is going to be a year of two halves. The first half is going to be a ... half of demand, and the second half is more about supply, which is coming back in reaction to the higher oil prices." The first half of the year will be so strong, Deshpande believes, that Brent could hit US$78 a barrel in the first or the second quarter. Yet in the second half of the year, drillers will increase their production in response to the higher prices, and this higher production may weigh on the benchmarks.

There is also something else that may occur before too long: a price correction resulting from the record-high bullish positions on the six most popular oil-related futures contracts. In his latest column , Reuters' John Kemp warned that despite the already record number of long bets on these six contracts, money managers are continuing to place more, with the number of net long bets on Brent alone rising by an equivalent of 14 million barrels in the week to January 23. In total, net long bets on the six contracts swelled by 44 million barrels to 1.484 billion barrels. More Top Reads From Oilprice.com:

Mamdouh G Salameh on January 30 2018 said:
The positive oil fundamentals of the global oil market can easily support an oil price ranging from $70-$75 a barrel in 2018. If similar positive market conditions continue into 2019, then we can see oil prices rising to $80/barrel or even higher in 2019 and hitting $100 or higher by 2020. A $70/barrel will be the for for Brent oil prices in 2018.

Prices will also be supported by a fast re-balancing of the market and also by an understanding between Saudi Arabia and Russia to maintain the OPEC/non-OPEC production cut agreement well beyond 2018 with some adjustments to reflect changing market conditions.

On the supply side, the global oil market will ignore exaggerated claims by the EIA and IEA about US shale oil production averaging 10.3 million barrels a day (mbd) in 2018 and rising to 11 mbd by 2019. My projection for US shale oil production in 2018 is 9.25 mbd made up of 5.10 mbd of shale oil and 4.15 mbd of conventional oil. My projection allows for a 5% depletion in US conventional wells.

The oil price has to rise beyond $100/barrel before one can talk about a price correction. I have always expressed the view that a fair price is $100-$130/barrel. Such a price will provide a great impetus to the global economy.

Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London

Citizen Oil on January 30 2018 said:
The daily oil prediction nonsense. Wasn't it just a few months ago the daily nonsense was "lower for longer" LOL Haven't heard that one for a while. Predictions we'd be in a $ 40 to $ 50 oil environment for years if not decades . Oh yeah, then we'd be at $ 10 when everyone drives an EV.

[Feb 02, 2018] Why Is The Shale Industry Still Not Profitable by Nick Cunningham

Looses of shale companies which hedged oil production for 2018 at 2017 prices can be tremendous.
Notable quotes:
"... Al Rajhi Capital notes that more recently, shale companies ended up locking in hedges at prices that could end up being quite a bit lower than the market price, which could limit their upside exposure should prices continue to rise. ..."
Feb 02, 2018 | oilprice.com
too much hype surrounding U.S. shale from the Saudi oil minister last week, a new report finds that shale drilling is still largely not profitable. Not only that, but costs are on the rise and drillers are pursuing "irrational production."

Riyadh-based Al Rajhi Capital dug into the financials of a long list of U.S. shale companies, and found that "despite rising prices most firms under our study are still in losses with no signs of improvement." The average return on asset for U.S. shale companies "is still a measly 0.8 percent," the financial services company wrote in its report.

Moreover, the widely-publicized efficiency gains could be overstated, at least according to Al Rajhi Capital. The firm said that in the third quarter of 2017, the "average operating cost per barrel has broadly remained the same without any efficiency gains." Not only that, but the cost of producing a barrel of oil, after factoring in the cost of spending and higher debt levels, has actually been rising quite a bit.

Shale companies often tout their rock-bottom breakeven prices, and they often use a narrowly defined metric that only includes the cost of drilling and production, leaving out all other costs. But because there are a lot of other expenses, only focusing on operating costs can be a bit misleading.

The Al Rajhi Capital report concludes that operating costs have indeed edged down over the past several years. However, a broader measure of the "cash required per barrel," which includes other costs such as depreciation, interest expense, tax expense, and spending on drilling and exploration, reveals a more damning picture. Al Rajhi finds that this "cash required per barrel" metric has been rising for several consecutive quarters, hitting an average $64 per barrel in the third quarter of 2017. That was a period of time in which WTI traded much lower, which essentially means that the average shale player was not profitable. Not everyone is posting poor figures. Diamondback Energy and Continental Resources had breakeven prices at about $52 and $37 per barrel in the third quarter, respectively, according to the Al Rajhi report. Parsley Energy, on the other hand, saw its "cash required per barrel" price rise to nearly $100 per barrel in the third quarter.

A long list of shale companies have promised a more cautious approach this year, with an emphasis on profits. It remains to be seen if that will happen, especially given the recent run up in prices. But Al Rajhi questions whether spending cuts will even result in a better financial position. "Even when capex declines, we are unlikely to see any sustained drop in cash flow required per barrel due to the nature of shale production and rising interest expenses," the Al Rajhi report concluded. In other words, cutting spending only leads to lower production, and the resulting decline in revenues will offset the benefit of lower spending. All the while, interest payments need to be made, which could be on the rise if debt levels are climbing.

One factor that has worked against some shale drillers is that the advantage of hedging future production has all but disappeared. In FY15 and FY16, the companies surveyed realized revenue gains on the order of $15 and $9 per barrel, respectively, by locking in future production at higher prices than what ended up prevailing in the market. But, that advantage has vanished. In the third quarter of 2017, the same companies only earned an extra $1 per barrel on average by hedging. Part of the reason for that is rising oil prices, as well as a flattening of the futures curve. Indeed, recently WTI and Brent have showed a strong trend toward backwardation -- in which longer-dated prices trade lower than near-term. That makes it much less attractive to lock in future production.

Al Rajhi Capital notes that more recently, shale companies ended up locking in hedges at prices that could end up being quite a bit lower than the market price, which could limit their upside exposure should prices continue to rise.

In short, the report needs to be offered as a retort against aggressive forecasts for shale production growth. Drilling is clearly on the rise and U.S. oil production is expected to increase for the foreseeable future. But the lack of profitability remains a significant problem for the shale industry.

[Jan 30, 2018] Why Is The Shale Industry Still Not Profitable

Notable quotes:
"... Al Rajhi Capital notes that more recently, shale companies ended up locking in hedges at prices that could end up being quite a bit lower than the market price, which could limit their upside exposure should prices continue to rise ..."
Jan 30, 2018 | www.nakedcapitalism.com

Riyadh-based Al Rajhi Capital dug into the financials of a long list of U.S. shale companies, and found that "despite rising prices most firms under our study are still in losses with no signs of improvement." The average return on asset for U.S. shale companies "is still a measly 0.8 percent," the financial services company wrote in its report.

Moreover, the widely-publicized efficiency gains could be overstated, at least according to Al Rajhi Capital. The firm said that in the third quarter of 2017, the "average operating cost per barrel has broadly remained the same without any efficiency gains." Not only that, but the cost of producing a barrel of oil, after factoring in the cost of spending and higher debt levels, has actually been rising quite a bit.

Shale companies often tout their rock-bottom breakeven prices, and they often use a narrowly defined metric that only includes the cost of drilling and production, leaving out all other costs. But because there are a lot of other expenses, only focusing on operating costs can be a bit misleading.

The Al Rajhi Capital report concludes that operating costs have indeed edged down over the past several years. However, a broader measure of the "cash required per barrel," which includes other costs such as depreciation, interest expense, tax expense, and spending on drilling and exploration, reveals a more damning picture. Al Rajhi finds that this "cash required per barrel" metric has been rising for several consecutive quarters, hitting an average $64 per barrel in the third quarter of 2017. That was a period of time in which WTI traded much lower, which essentially means that the average shale player was not profitable.

Not everyone is posting poor figures. Diamondback Energy and Continental Resources had breakeven prices at about $52 and $37 per barrel in the third quarter, respectively, according to the Al Rajhi report. Parsley Energy, on the other hand, saw its "cash required per barrel" price rise to nearly $100 per barrel in the third quarter.

A long list of shale companies have promised a more cautious approach this year, with an emphasis on profits. It remains to be seen if that will happen, especially given the recent run up in prices.

But Al Rajhi questions whether spending cuts will even result in a better financial position. "Even when capex declines, we are unlikely to see any sustained drop in cash flow required per barrel due to the nature of shale production and rising interest expenses," the Al Rajhi report concluded. In other words, cutting spending only leads to lower production, and the resulting decline in revenues will offset the benefit of lower spending. All the while, interest payments need to be made, which could be on the rise if debt levels are climbing.

One factor that has worked against some shale drillers is that the advantage of hedging future production has all but disappeared. In FY15 and FY16, the companies surveyed realized revenue gains on the order of $15 and $9 per barrel, respectively, by locking in future production at higher prices than what ended up prevailing in the market. But, that advantage has vanished. In the third quarter of 2017, the same companies only earned an extra $1 per barrel on average by hedging. Related: The Unstoppable Oil Rally

Part of the reason for that is rising oil prices, as well as a flattening of the futures curve. Indeed, recently WTI and Brent have showed a strong trend toward backwardation -- in which longer-dated prices trade lower than near-term. That makes it much less attractive to lock in future production.

Al Rajhi Capital notes that more recently, shale companies ended up locking in hedges at prices that could end up being quite a bit lower than the market price, which could limit their upside exposure should prices continue to rise .

In short, the report needs to be offered as a retort against aggressive forecasts for shale production growth. Drilling is clearly on the rise and U.S. oil production is expected to increase for the foreseeable future. But the lack of profitability remains a significant problem for the shale industry.

[Jan 30, 2018] The Dark Side of America's Rise to Oil Superpower

Jan 30, 2018 | peakoilbarrel.com

Cats@Home x Ignored says: 01/25/2018 at 7:53 pm

The Dark Side of America's Rise to Oil Superpower
By Javier Blas

https://www.bloomberg.com/news/articles/2018-01-25/the-dark-side-of-america-s-rise-to-oil-superpower

The last time U.S. drillers pumped 10 million barrels of crude a day, Richard Nixon was in the White House. The first oil crisis hadn't yet scared Americans into buying Toyotas, and fracking was an experimental technique a handful of engineers were trying, with meager success, to popularize. It was 1970, and oil sold for $1.80 a barrel.

Almost five decades later, with oil hovering near $65 a barrel, daily U.S. crude output is about to hit the eight-digit mark again. It's a significant milestone on the way to fulfilling a dream that a generation ago seemed far-fetched: By the end of the year, the U.S. may well be the world's biggest oil producer. With that, America takes a big step toward energy independence.

The U.S. crowing from the top of a hill long occupied by Saudi Arabia or Russia would scramble geopolitics. A new world energy order could emerge. That shuffling will be good for America but not so much for the planet.

For now, though, the petroleum train is chugging. And you can thank the resilience of the U.S. shale industry for it.

What didn't kill shale drillers made them stronger. The survivors have transformed themselves into leaner, faster versions that can thrive even at lower oil prices. Shale isn't any longer just about grit, sweat, and luck. Technology is key. Geologists use smartphones to direct drilling, and companies are putting in longer and longer wells. At current prices, drillers can walk and chew gum at the same time -- lifting production and profits simultaneously.

Fracking -- blasting water and sand deep underground to free oil from shale rock -- has improved, too. It's what many call Shale 2.0. And it's not just the risk-taking pioneers who dominated the first phase of the revolution, such as Trump friend Harold Hamm of Continental Resources Inc., who are benefiting from the surge. Exxon Mobil Corp., Chevron Corp., and other major oil groups are joining the rush. U.S. shale is "seemingly on steroids," says Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. in London. "The market remains enchanted by the ability of shale producers to adapt to lower prices and to continue to grow."

Robert G. Valiant x Ignored says: 01/25/2018 at 8:38 pm
To infinity, and beyond.
Mike x Ignored says: 01/25/2018 at 9:18 pm
This feller used 'hype' because there is likely no word for bullshit in Farsi: https://oilprice.com/Energy/Energy-General/Saudi-Oil-Minister-Tired-Of-Shale-Hype.html .

https://www.oilystuffblog.com/single-post/2018/01/25/Cartoon-Of-the-Week

shallow sand x Ignored says: 01/25/2018 at 11:34 pm
Geez Mike, your link to the oilprice.com story will surely bring Texas Tea back. Upsetting the oil minister of KSA is the ultimate sign of victory to the shale/political types.

These shale guys are bound and determined to kill the oil price rally, and IEA and EIA (which BTW in my opinion are both very political organizations) are really boosting it too.

I know you feel you have a short window, but hang in there. The current price is pretty good for "us types" and maybe it will hold between here and $55 WTI for the downside, while we blow through 10 million and 11 million, all the while thinking, just like 1970, that USA has unlimited supplies of oil.

I am starting to think the dollar is the key anyway. It was weak in 2011-2014, and oil was sky high. Might be headed that way again, who knows.

Really enjoying all of the history on Oilystuff. Keep it coming!

[Jan 30, 2018] Iraqi Oil Minister confident that an oil export capacity of five million barrels per day will be realized by the end of 2018

Jan 30, 2018 | peakoilbarrel.com

Energy News: 01/29/2018 at 7:22 am

2018-01-29 Chatham House Events – Iraqi Oil Minister confident that an oil export capacity of five million barrels per day will be realized by the end of 2018 – a "landmark in the oil industry"

Current Iraqi oil reserves of 153 billion barrels due to reach 175 billion in the coming years, says oil minister Luaibi at Annual MENA (Middle East & North Africa) Energy conference

Iraq's oil minister Luaibi said the country seeks to ramp up refining capacity and reduce imports of refined products :"I am determined that Iraq will become a product exporter instead of product importer".

https://twitter.com/CH_Events

[Jan 21, 2018] Wells that they drilled last year will produce the biggest rates of decline, well over 50 percent. So, how many wells would need to be completed to increase production over a million barrels in 2018?

Jan 21, 2018 | peakoilbarrel.com

John x Ignored says: 01/18/2018 at 9:12 pm

Will be interesting to see US shale production in response to increasing frac hits, increasing costs, mounting debt wall. These are all legitimate issues which IEA seems to overlook when issuing rosy predictions. Three Stooges thought they could repair a hole in a pair of pants by cutting it out .same logic as IEA.
Guym x Ignored says: 01/19/2018 at 5:20 pm
Yeah, it's those items and more. The biggest they overlook is declines from production. The past two years, they have concentrated in sweet spots, to keep their chins above water. In doing so, they have miraculously brought production back up to 2015 highs, and not much more, although the EIA is reporting imaginary oil. Underneath all that production, wells are declining at a rapid rate. The biggest rates are what they drilled last year. Those wells will produce less than half of what they produced last year. So, how many wells would need to be completed to increase production over a million barrels in 2018? More than current capacity, that's for sure.
Dennis Coyne x Ignored says: 01/19/2018 at 6:40 pm
Hi Guym,

I agree.

Although tight oil output has increased at an annual rate of close to 1000 kb/d over the past 12 months (Dec 2016 to Nov 2017), I doubt that rate of increase will continue, probably about half that unless oil prices rise more than I expect (and I expect we might get to $85/b by Jan 2019).

Guym x Ignored says: 01/19/2018 at 7:48 pm
I'd say it's a crap shoot as to whether it goes up, or down with about the same number of completions in 2018 as 2017. Ok, let's say we have more completions, I still can't say it will go up 500k barrels. While people place statistics on depletion rates, I haven't seen a well, yet, that can comprehend statistics. As a matter of fact, they defy statistics.
There are 180k producing wells in Texas. There were about 5400 completions in 2017. That's about 3% of total producing wells.

[Jan 21, 2018] "frack cocaine" and oil price swings

Jan 20, 2018 | peakoilbarrel.com

Stephen Hren: 01/20/2018 at 10:55 am

I believe the oil price will be extremely volatile over the coming decade. There are major developments in both the supply and demand for oil that are very independent of each other and unlikely to move in tandem, with the likely result that there will be ebbs and flows of both supply and demand that have little relationship to one another, causing wild price swings.

I would summarize these as follows:

SUPPLY: The development of medium- and long-term supply appears to be severely curtailed by fracking and a limited supply of suitable sites for new exploration. CEOs are likely worried that any developments will not be profitable because shale will overproduce and knock down prices again. Until a clear picture of this phenomenon is apparent, it will curtail the willingness of oil companies to tackle bigger and more expensive projects. Possible new medium-term supply appears to exist in Mexico's Gulf, Guyana, South China Sea, off-shore Brazil, Canadian Tar Sands, possibly the Arctic. The problem with developing these resources is fracking.

Fracking leads to a quick hit of oil, based primarily on debt infusion, that quickly dissipates – hence I like the term "frack cocaine". It prioritizes rapid expansion of oil supply in the short term to the detriment of medium and long term investments. What Wall Street giveth, Wall Street can also taketh away. The shale oil industry has a similar profile to developing countries like Mexico in 1994 and Argentina in 2005. The flow of money can halt abruptly, and the consequences could be disastrous. The short-term oil will quickly go away, but the investments for serious longer term oil supply will likely be too little, possibly much too little.

Political trouble will likely lead to disruptions in Venezuela, Nigeria, and Libya. The cold war between Iran and KSA will likely remain cold, but if proxy wars get out of hand, massive oil supply disruptions will likely ensue.

DEMAND: The outlook for short and medium term demand is quite good. Global growth is strong, and entrenched systems of car production that favor ICEs will continue. Longer term, EVs and self-driving EVs in terms of taxi systems pose serious threats (perhaps least of all to the US, where distances tend to be longer, density is lower, and gas taxes are cheapest). GM is deploying self-driving cars as a taxi service next year based on the EV Bolt. Developing countries have a big incentive to embrace this technology for their populations: small diesel engines that primarily power scooters and taxis and larger bus engines lead to horrible air pollution, and electricity can be generated within borders rather than imported (whether by coal, gas, wind or solar doesn't matter, so far as oil demand is concerned). Europe's love affair with diesel cars is over and gas taxes (and parking prices) remain high, making EVs and EV-based taxi services very appealing. Battery technology is about to enter a new wave, with solid-state lithium ion batteries that are basically dendrite-free (hence much longer life), super-safe, easier to charge, and 2-3 times the range of current technologies now in production. Specifically I am looking at Toyota, who has promised such a vehicle by 2022. All other manufacturers better be able to match Toyota by then or very soon after, or they will leave everyone in the dust just like they did with hybrids. Lithium-based batteries and lithium itself could see major price swings based on this rapid increase in demand.

Or, of course, the global economy could fall off a cliff at any moment. Fwiw, I see a price range for oil over the next decade as between $25-$250, with very little pattern to its rise and fall. Volatility will be key. Oil may peak and fall several times based on fracking and other short-term trends – a very bumpy plateau. I reckon by 2030 the peak in oil will be obvious, although some will call it from supply while others will call it from demand, based on their preferences. By that date, little to no investment in oil will likley make financial sense, and it will begin to whither away as a global industry. This will be from a combination of reduction in demand due to an EV technological wave that will unstoppable by then, and political collapse that occurs in the interim in countries heavily depending on exporting or importing oil.

Should be an interesting decade!

[Jan 21, 2018] Possible Seneca cliff of oil production due to technological enhancements of extraction of oil from depleting fields. And first of all KSA

Notable quotes:
"... Major oil producing countries, Saudi Arabia chief among them, are using technology to stave off production declines. These YouTube videos are a perfect example of the extreme lengths being employed to continue production: ..."
"... When the decline kicks in, these technologies will ensure that the cliff will be steeper. While I believe we are living at the absolute peak of world production and that decline will kick in soon, I'm not so concerned about specific predictions. It will happen soon enough and when it does the impact will be severe. ..."
"... I think of this problem in personal terms -- my son was born in 2000. He will live to see a world of diminishing oil production (as well as sea level rise, resource conflicts, and many other problems). Does anyone doubt that by the time he is 30 (2030) world oil production will be in decline? Does anyone doubt by the time he is 50 (2050) the world will be a drastically different place than it is today? I have lived through the peak period. I cannot envision what comes after. I can only hope that my son finds a way through it. ..."
"... "Does anyone doubt that by the time he is 30 (2030) world oil production will be in decline? Does anyone doubt by the time he is 50 (2050) the world will be a drastically different place than it is today?" ..."
"... Perhaps. But such sentiments were very common ten, fifteen years ago, and they were directed toward today, not 2030. So, yes, I do "doubt" it, but that's not saying much, as it's a subject I find interesting but useless to speculate about. ..."
"... I'm checking in here for the first time in about 9 years. I'm an old-time peaker, who jumped ship in 2009 when it became clear the dire predictions of Campbell, Deffeyes, et al., were failing to materialize. ..."
Jan 19, 2018 | peakoilbarrel.com

x says: 01/19/2018 at 9:55 am

Ron is absolutely right about the creaming issue. Major oil producing countries, Saudi Arabia chief among them, are using technology to stave off production declines. These YouTube videos are a perfect example of the extreme lengths being employed to continue production:

These videos underscore how uniquely valuable oil is as an energy source and how no other substitute will ever come close to matching its utility.

When the decline kicks in, these technologies will ensure that the cliff will be steeper. While I believe we are living at the absolute peak of world production and that decline will kick in soon, I'm not so concerned about specific predictions. It will happen soon enough and when it does the impact will be severe.

I think of this problem in personal terms -- my son was born in 2000. He will live to see a world of diminishing oil production (as well as sea level rise, resource conflicts, and many other problems). Does anyone doubt that by the time he is 30 (2030) world oil production will be in decline? Does anyone doubt by the time he is 50 (2050) the world will be a drastically different place than it is today? I have lived through the peak period. I cannot envision what comes after. I can only hope that my son finds a way through it.

Michael says: 01/19/2018 at 10:12 am

"Does anyone doubt that by the time he is 30 (2030) world oil production will be in decline? Does anyone doubt by the time he is 50 (2050) the world will be a drastically different place than it is today?"

Perhaps. But such sentiments were very common ten, fifteen years ago, and they were directed toward today, not 2030. So, yes, I do "doubt" it, but that's not saying much, as it's a subject I find interesting but useless to speculate about.

I'm checking in here for the first time in about 9 years. I'm an old-time peaker, who jumped ship in 2009 when it became clear the dire predictions of Campbell, Deffeyes, et al., were failing to materialize.

This doesn't mean I think oil is infinite or anything. I do think our capacity to predict doom is much more circumscribed than our abilities to avoid it.

(I like the new editing feature on this site.)

[Jan 16, 2018] GOM oil and gas production in decline from now on

Jan 16, 2018 | peakoilbarrel.com

SouthLaGeo

x Ignored says: 01/12/2018 at 7:11 pm
Interesting BOEM report attached – their prediction of GOM oil and gas production from 2018-2027.
They predict oil production will increase from 1.65-1.67 mmbopd in the 2017-2019 window to 1.74-1.77 mmbopd in the 2023-2027 time frame. They include future production from current reserves, contingent resources and undiscovered resources. Contingent resources are mainly field expansion projects, new fault blocks, new reservoirs, and resources from discoveries that have not been put on production.
They have initial production from undiscovered resources occurring already in 2019 – suggesting that a few discoveries will be made and be on line by the end of 2019. Seems rather ambitious even for subsea tiebacks.
Given the lack of GOM exploration success in the last few years, my biggest challenge to these predictions are their estimates of production coming from new discoveries. They show about 1 BBO of production comes from currently undiscovered resources in this 10 year window.

https://www.boem.gov/BOEM-2017-082/

George Kaplan x Ignored says: 01/13/2018 at 3:14 am
SLG – hope you are well and had a good holidays. Here is my updated effort at the same thing. I've added some new discoveries, but not as big or developed as fast BOEM show. I've included all qualified fields as named entries except a few discovered in 2016 and 2017, and for a lot I've had to make guesses for reserves based on the expected development size (numbers in brackets show nameplate capacity). I might be able to improve things a bit when BOEM reserve numbers for end of 2016 come out, but it's still not going to look much like their estimates. It's noticeable that there's a lot of activity in short term, small tie backs now – but these only add about 5 to 10 kbpd and immediately start to decline. So like you I don't know where they are getting such high contingent resource production additions from unless it is all on existing developments – I guess if a lot of fields get to grow like Mars-Ursa has and Atlantis might this year then there'd be enough, but that seems unlikely to me, especially at the rate they show it.

SouthLaGeo x Ignored says: 01/13/2018 at 8:47 am
Thanks George, and same to you for the new year.
I've made a stab at comparing numerous production profiles for the 2018-2027 window – your's from above, my midcase and downside estimates from a little over a year ago, and BOEM's estimates – both their total estimate, and their total estimate minus any new resources/discoveries.
I plan to expand on this in a future post – including revised EUR estimate ranges.

George Kaplan x Ignored says: 01/13/2018 at 11:53 am
They are all models with something worthwhile to add to the discussion, which is not what I would say about the EIA projections. They just add have some kind of growth rate, with no basis in actual numbers, and make it look fancy by adding a hurricane effect – and yet this is the number usually quoted in the MSM. I think their predictions a couple of years ago had an exit rate for this year of 2.2 mmbpd – miles off, and when they do try to provide bottom up justification they look ridiculously ill informed.

Fernando Leanme x Ignored says: 01/15/2018 at 4:49 am
Maybe they have a higher oil price forecast? Or they don't bother to see if what gets put on line is worth developing? I know this is hard, but try preparing a forecast with prices increasing 3% per year above inflation for 30 years, and you will get a higher forecast.
Dennis Coyne x Ignored says: 01/15/2018 at 10:28 am
https://www.eia.gov/outlooks/aeo/data/browser/#/?id=12-AEO2017&region=0-0&cases=ref2017&start=2015&end=2030&f=A&linechart=ref2017-d120816a.3-12-AEO2017&sourcekey=0 \

The BOEM probably uses the EIA AEO 2017 reference price forecast.

[Jan 13, 2018] All eyes may be fixed on Jan. 18 as the day China begins trading oil contracts in Yuan currency ~ The Daily Economist

Jan 13, 2018 | www.thedailyeconomist.com

According to one source out of the Far East, China's Yuan denominated oil contract is set to go live for trading on Jan. 18.

While not an official date announced from government sources, according to an anonymous member of the Futures market where the new oil contract will trade, this is the expected date for Beijing to begin its latest challenge to the long-standing Petrodollar system.

According to the Shanghai-based news portal Jiemian, which cited an unidentified person from a futures company, trading is expected to start Jan. 18. Multiple rounds of testing have been carried out and all listing requirements met. The State Council, China's cabinet, was said to have given its approval in December, one of the final regulatory hurdles. The push for oil futures gained impetus in 2017 when China surpassed the U.S. as the world's biggest crude importer. - Zerohedge
While the Chinese markets are not expected to immediately take dominion over the West's Brent and WTI oil markets, several countries which include Venezuela, Russia, Qatar, Pakistan, and perhaps even Iran appear ready to transition away from dollar based oil trade. Additionally, many more nations will likely be willing to dip their toes into this market as it proves itself to be a viable alternative to dollar hegemony, and as protection from foreign policy threats from the U.S. which often uses the dollar as leverage in economic sanctions.

[Jan 11, 2018] 3 Million Barrels Per Day Could Go Offline In 2018 OilPrice.com

Jan 11, 2018 | oilprice.com

Ed Morse of Citi says that Venezuela's production could fall below 1 mb/d , which would essentially be a loss of 700,000 bpd by the end of the year.

The losses from Venezuela, combined with potential outages in Iraq, Libya and Nigeria, could reach 3 mb/d in 2018, Citi said .

[Jan 11, 2018] 5 Oil Market Myths In 2018 OilPrice.com

Jan 11, 2018 | oilprice.com

Busting The Five Biggest Oil Market Myths

By ZeroHedge - Jan 09, 2018, 3:00 PM CST
Rig

The oil market has come to be defined by several narratives over the past couple of years: market rebalancing, OPEC versus shale, Russia's delicate relationship with OPEC, OPEC's conformity with production cuts with the latest deal extension running to end of 2018 and shale's resilience to lower prices.

But these frameworks have created a narrow ideology that could harm the way producers participate in the oil market this year and beyond.

Myth 1: OPEC's exit strategy means exit

The idea that the 24 producers who came together and struck a deal to cut production by 1.8 million b/d in November 2016 are somehow going to 'exit' the alliance later this year is misleading. There will be no exit when OPEC, Russia and other non-OPEC producers decide the market has rebalanced -- based on OECD stock levels reaching their five-year average -- rather a continuation of the grand alliance under amended, and most probably looser, terms.

OPEC's hands are somewhat tied: unwind from the deal and undo all the good work achieved, and so it must continue managing the market in another guise to create stability and encourage long-term investment in oil.

Gary Ross at Platts Analytics has been talking of cuts "into perpetuity" since the historic deal was made and informed industry sources note that the exit strategy is the wrong phrase to be using. But while there is uncertainty as to what that new agreement will look like, the market will anxiously hang on to the exit strategy term and these jitters could serve to keep an ultimate cap on prices.

Myth 2: OPEC's top priority is market rebalancing

Market rebalancing may be the measure, backwardation may be the means but price is the ultimate goal.

When prices tanked after a nine-month extension was agreed in May 2017, there was clear disappointment from OPEC sources even if publicly the whims of the market were dismissed and ministers anxiously waited for prices to recover in the medium term.

The difficulty with a price target is that nobody knows what an optimal long-term sustainable price is so the goal posts keep shifting. Besides, different price levels create new supply-demand dynamics and the price may be influenced by more than just underlying fundamentals such as geopolitical risk.

Related: Is This The Beginning Of An Oil Sands Revival?

Thus, for now OPEC's clumsy priority is market rebalancing. It just needs remembering that bringing down the more than 100 million barrels in stocks to its five-year average could prove elusive given the oversupply in recent years.

There is also the flipside risk in which OPEC tightens too much. Indeed, Saudi Arabia oil minister Khalid al-Falih has admitted that OPEC may need a more concrete goal at its June meeting and when it alters its market management strategy it may well coincide with a new long-term target.

Myth 3: Russia will end its alliance with OPEC

Russian oil companies have begrudgingly stayed on board with the deal due to the iron hand of President Vladimir Putin and steely determination of oil minister Alexander Novak.

Russia is not so at ease with ongoing market management and the fanfare and media circus that surrounds OPEC. Russia also arguably needs the extra revenue less and is more worried about losing market share in Europe and Asia to competition from rising U.S. shale oil exports. But the growing political nexus between Russia and Saudi Arabia, Russia's increasing swagger as joint head of this broad OPEC alliance (as noted at the November 30 meeting in Vienna with everyone awaiting Novak's arrival) as well as the budgetary need for sustained higher prices means Russia could well be in it for the long haul.

Putin is keenly aware of the U.S.-Saudi ties and has been building relations with Saudi Arabia since 2007 when it offered the kingdom nuclear aid.

Indeed, the overriding concern for the world's biggest oil producer is that, should the agreement unravel, prices could plunge putting the country back at ground zero. It may be an inconvenient truth for both, but to wield the necessary global energy influence, OPEC and Russia need each other indefinitely.

Myth 4: The battleground is OPEC versus U.S. shale

Ever since OPEC did an about-turn on its pump-at-will strategy and started working on a market share approach that was first brokered in Algiers in September 2016, the battle between OPEC and shale has been exaggerated. What may have started out as a move to crush U.S. shale in 2014 has transformed into a broader coexistence at the end of 2017 in a bid to find an equilibrium that allows profits to be made and coffers to be filled by all producers.

(Click to enlarge)

There has been growing dialogue between U.S. frackers and the oil producer group.

It could be argued that OPEC's first mission was to stop the runaway train that was OPEC output as producers ramped up production month on month as competition intensified. It could also be argued that the real target for OPEC is still unconventional and uneconomic oil as once investment becomes a free for all, OPEC risks a repeat of an oil boom and bust and the volatility it is trying to guard against. But at what point will deepwater, oil sands and Arctic drilling in general become economic enough to persuade investors to commit?

For example, the U.S. deepwater Gulf of Mexico sector has struggled since crude dropped in late 2014, but costs have dropped and efficiencies improved, and analysts suggest the sector may be at a turning point if prices are maintained.

Myth 5: U.S. shale is simply resilient

U.S. shale producers may well be predicted to make capex gains in 2018, they may have made technological innovations in drilling and completions that have brought down costs and they may have adapted to a lower price environment. In fact, Platts Analytics predicts a U.S. shale production growth of 900,000 b/d in 2018. But, despite all this, a productivity inflection point may well have been reached, a crossroads for investors.

(Click to enlarge)

Cyclical cost efficiencies and geological productivity are beginning to unwind with a combination of inflation and a broadening from the sweetest spots and core acreage.

Related: China Is About To Shake Up Oil Futures

In the Permian, rig efficiency peaked in July 2016 according to the EIA, and has since consistently decreased, while the Eagle Ford and Anadarko (Woodford) plays have experienced a significant drop-off in rig productivity. Moreover, investors want a return on their capital and have tired of capturing resources without seeing value being maximized. For almost a decade, the U.S. exploration and production industry has outspent its cash flows in drilling costs, requiring a constant inflow of debt and equity financing to keep going.

With prices back above $60 a barrel, can investors make a healthy sum? With the biggest producers now the oil majors, their shareholders may prefer returns over market share.

By Paul Hickin via Zerohedge

[Jan 09, 2018] Oil prices are volatile because of the fiscally irresponsible, short investment nature of the shale oil industry and offshore development takes years and years to bring to market

There is natural gas coming out of our ears at the moment because of the shale phenomena; the price is tanking back to the mid $2's and there is no place to put anymore gas.
Notable quotes:
"... Shale companies are on track to spend $20 billion more than they will generate in the next six months if prices hover around $40 a barrel, analysts say. ..."
"... Compensation practices play a role in the behavior of U.S. shale producers: Most of their management teams are paid based on growth or adding new oil and gas reserves -- not on profits -- according to Matt Portillo, an analyst at Tudor Pickering Holt & Co., in Houston. "Until that changes, growth may continue to prevail," he said. ..."
Jan 09, 2018 | peakoilbarrel.com

Mike: 01/08/2018 at 7:34 am

The shale oil industry is NOT profitable. It never has been and in general terms it will not be in 2018 either. There has always been something fishy about its funding, particularly when wanders like this guy can make $16M a year in compensation, while his company looses money year over year for stock holders.

Clearly, however, it is not his fault his company can't be profitable and it is not their fault they are "forced" to borrow all that money

Anadarko's Al Walker Says US Shale Is An Alcoholic And Investors Are 'A Problem'

As we've noted on too many occasions to count, this is aiding and abetting a situation where these companies effectively sow the seeds of their own demise. They're running up the down escalator. They're working their asses off to drive down the price of the very commodity they're producing.

And hilariously, they think maybe you're the problem. Here's the Journal again:

"The biggest problem our industry faces today is you guys," Al Walker, chief executive of Anadarko Petroleum Corp. , told investors at a conference last month.

Wall Street has become an enabler that pushes companies to grow production at any cost, while punishing those that try to live within their means, Mr. Walker said, adding: "It's kind of like going to AA. You know, we need a partner. We really need the investment community to show discipline."

Even if companies cut back on drilling now, it wouldn't be enough to stop a new wave of oil from hitting the market in the second half of the year : U.S. shale output typically lags behind new drilling by four to six months, analysts say.

Shale companies are on track to spend $20 billion more than they will generate in the next six months if prices hover around $40 a barrel, analysts say.

Compensation practices play a role in the behavior of U.S. shale producers: Most of their management teams are paid based on growth or adding new oil and gas reserves -- not on profits -- according to Matt Portillo, an analyst at Tudor Pickering Holt & Co., in Houston. "Until that changes, growth may continue to prevail," he said.

Isn't that last bit about executive compensation great?

So folks like Al Walker are paid based not on profits, but on growth, and that growth is funded by investors like you.

So if you connect the dots there, it means you are literally giving these management teams money to fund the growth that ends up boosting their compensation, and that growth is going to ultimately bankrupt the companies you're investing in by creating a supply glut.

Welcome to the shale industry, goddammit. Enjoy your stay.

[Jan 09, 2018] Oil rises above $68 to highest since May 2015 on tighter market

Jan 09, 2018 | www.reuters.com

Oil rose further above $68 a barrel on Tuesday, touching its highest since May 2015, supported by OPEC-led production cuts and expectations U.S. crude inventories fell for an eighth week.

[Jan 08, 2018] To what extent shale companies are just prostitutes of Wall Street and to what extent they are independent oil production companies?

Jan 08, 2018 | peakoilbarrel.com

shallow sand x Ignored says: 01/05/2018 at 6:36 am

Every article on oil prices in the last several months says the ONLY downside is US shale.

Do the larger US shale companies pay attention to supply/demand dynamics at all? At current prices most can show positive EPS, assuming service costs do not surge too much?

For example, auto manufacturers do not produce the maximum vehicles possible. They pay attention to supply and demand. Almost every single manufacturer tries to forecast demand for its product.

Even farmers try to grow what crops are in most demand and raise what livestock is most in demand.

We have not drilled a well in over 3 years due to lack of oil demand, our production has fallen.

So, we will see.

Mike x Ignored says: 01/05/2018 at 6:47 am
Shallow, here you go: https://www.forbes.com/sites/daneberhart/2018/01/04/revenge-of-the-oil-services-sector-in-2018/#25e1060569e9 maybe this, rising interest rates, and fresh water issues in 2018 in arid West Texas will slow the bastards down a little and help give us some price stability.
Longtimber x Ignored says: 01/05/2018 at 2:14 pm
"Rystad Energy is even bullish on American oil. The Norwegian firm sees U.S. crude output hitting 11 million barrels per day by December, narrowly surpassing global leader Russia and OPEC kingpin Saudi Arabia."

http://peakoil.com/production/america-could-become-oil-king-of-the-world-in-2018
http://money.cnn.com/2018/01/03/investing/oil-us-russia-saudi-arabia-shale/index.html
y MAD MAD MAD Mad 2018 world. Just drive down and dig it up, dig it all up.
https://www.youtube.com/watch?v=w00Kab17aeI

Guym x Ignored says: 01/05/2018 at 7:11 pm
Absolute poppycock! US output will do good to get to the level that EIA is currently reporting, about 9.75 by the end of 2018. Mike's post explains why. 11 million barrels a day,? Man, that is some potent stuff they are smoking.
likbez says: 01/07/2018 at 7:30 pm
shallow sand,

>Do the larger US shale companies pay attention to supply/demand dynamics at all?
> At current prices most can show positive EPS, assuming service costs do not surge too much?

This might be a wrong question. The right question IMHO is: "To what extent shale companies are just prostitutes of Wall Street and to what extent they are independent oil production companies? "

What if the key role for such companies is to be a part of "price crasher" mechanism (along with "naked shorts" and similar financial chicanery) ?

I believe that with the shale boom it is Wall Street that obtained mechanism using which they can dictate oil prices.

Not Saudies or OPEC in general but Wall Street titans are now in the driving seat, although OPEC and Russia are fighting back by limiting production.

And Wall Street is not shy to step on the throat of "conventional" oil producers and force them to produce with no or even negative margins because of the specific of oil industry.

When you gets so much money on such lenient conditions something is fishy This dual production mode (oil plus junk bonds and evergreen loans) looks to me just a variable of "subprime housing boom" on a new level.

[Jan 08, 2018] Oil will take a much higher price to get any bids for the NS and for the GOM

Notable quotes:
"... Always skeptical of "technical recoverable guesses," my suggestion is to focus on product prices instead and the current reduced level of activity in the GOM. Oil prices are volatile because of the fiscally irresponsible, short investment nature of the shale oil industry and offshore development takes years and years to bring to market. There is natural gas coming out of our ears at the moment because of the shale phenomena; the price is tanking back to the mid $2's and there is no place to put anymore gas. ..."
"... much like Trump turned over Obama's legislation regarding offshore drilling, this one will be turned over as well. I don't think a 3 year time frame and price volatility gives the offshore industry enough time to do anything with this, personally. Its fluff. ..."
Jan 08, 2018 | peakoilbarrel.com

HVACman

x Ignored says: 01/05/2018 at 5:23 pm
Carrying over from islandboy's EIA thread:

http://www.sciencemag.org/news/2018/01/trump-proposes-vast-expansion-offshore-drilling

From post above:
TRUMP PROPOSES VAST EXPANSION OF OFFSHORE DRILLING
(Zinke) "This is a start on looking at American energy dominance,"

Regardless of emotional reaction to this announcement, I am skeptical of its viability.

My skeptical mind tells me, when all else fails, look at the numbers. The numbers per MMS chart on Wikipedia:

Undiscovered technically-recoverable oil resources on the outer continental shelf, 2006:

Washington/Oregon – 0.4Bbo Nor Cal – 2.08 Bbo Central Cal – 2.31 Bbo So Cal – 5.74 Bbo All Atlantic + east FL – 3.84 Bbo GOM – 44.92 Bbo North Slope – 23.6 Bbo Alaska less NS – 3.0 Bbo

Total 85.88 Bbo

https://upload.wikimedia.org/wikipedia/commons/5/54/758Syms2006OCSMapWithPlanni.png

I conclude that most of the "new" oil unleashed by this stunning decision is in the GOM and and the North slope, both of which are well-known by the industry and which have been open to Federal leases in the past. After Shell's bad experience, oil will take a much higher price to get any bids for the NS and for the GOM, this is just BAU. The Atlantic and Pacific Coasts don't have enough resource to be worth exploring, much less leasing.

OK, there are some sharp oil people here on the forum and I'm just a dumb HVAC engineer. Help me. Am I missing something? Are they actually going for the natural gas, and is it worth going after?

Boomer II x Ignored says: 01/05/2018 at 11:20 pm
Either Trump and his energy folks are so determined to stick it to environmentalists that they are willing to hurt the industries they claim to help, or they know this won't amount to anything but it will impress their hardcore supporters.
shallow sand x Ignored says: 01/06/2018 at 12:10 am
I sincerely doubt most states will cooperate with allowing all the shoreline and shallow water infrastructure needed to replicate the GOM.

Can anyone see FL allow pipelines running to tank farms located on the shoreline?

I understand the states control from the shore to 3 miles out.

If I am wrong, please point out how.

Greenbub x Ignored says: 01/06/2018 at 7:24 pm
Shallow, you aren't kidding about these reckless frackers:

http://thehill.com/blogs/blog-briefing-room/367780-michael-moore-says-hes-going-to-frack-off-coast-near-mar-a-lago

Mike x Ignored says: 01/06/2018 at 6:57 am
I believe that is a good summary HVAC, as is Boomers suggestion that this offshore development legislation is cursory and an otherwise meaningless gesture made toward an agenda that involves eliminating regulations for the oil and gas industry and "unleashing" America's energy might on the rest of the world.

Always skeptical of "technical recoverable guesses," my suggestion is to focus on product prices instead and the current reduced level of activity in the GOM. Oil prices are volatile because of the fiscally irresponsible, short investment nature of the shale oil industry and offshore development takes years and years to bring to market. There is natural gas coming out of our ears at the moment because of the shale phenomena; the price is tanking back to the mid $2's and there is no place to put anymore gas.

This is another nail in this administrations coffin, from my conservative perspective. It is enraging the environmental left and will help assure the biggest Democratic turnout in history in 3 years.

Then, much like Trump turned over Obama's legislation regarding offshore drilling, this one will be turned over as well. I don't think a 3 year time frame and price volatility gives the offshore industry enough time to do anything with this, personally. Its fluff.

[Jan 05, 2018] Oil And Gas Run Low As East Coast Sees Record Snowfall

Jan 05, 2018 | oilprice.com

The past week of continuous record low temperatures and snowfall has oil-dependent power plants in the northeast scrambling to secure supplies of some of the dirtiest burning oil available in the market due to an impending supply shortage, according to a new report by Hellenic Shipping News .

Oil fuels 30 percent of the New England power plant market, but winter storms could lead to another foot of snow, making it difficult for tankers or trains to deliver needed commodities, Marcia Blomberg of regional grid operator ISO New England, said.

Oil imports to the East Coast jumped by almost 60 percent last week in anticipation of increased demand due to heating needs. JBC Energy predicts distillate use to increase by 90,000 barrels per day in January and February as well.

The cold weather, expected to become a "bomb cyclone" in the coming days, has also shocked natural gas markets. Extreme cold is cutting production in North Dakota's Bakken, while demand is surging because everyone is turning up the thermostat to stay warm.

Reuters said that gas flowing through interstate pipelines from North Dakota dropped from 1.3 billion cubic feet per day in the week ending on December 25 to just 1 bcf/d as of Tuesday. Texas (-20 percent) Oklahoma (-22 percent) and Pennsylvania (-5 percent) are also reporting weather-related production problems, Genscape data says.

[Jan 03, 2018] Oil production in the USA remains flat

Notable quotes:
"... At this point the only (legal) reason left to explain the divergence is that the EIA has started including NGL into their numbers ..."
Dec 29, 2017 | peakoilbarrel.com

Energy News says: 12/29/2017 at 11:54 am

EIA 914 Survey, October crude oil production 9,637 kb/day, +167 kb/day m/m. September revised down -11 kb/d to 9,470 kb/day

Texas October 3,767 kb/day, September 3,561 kb/day revised down -13 kb/d

Gulf of Mexico October (Hurricane Nate) 1,449 kb/day, September 1,649 kb/day, revised -1 kb/d

https://www.eia.gov/petroleum/production/#oil-tab

dclonghorn says: 12/29/2017 at 12:00 pm
EIA estimated Texas production at 3767000 bpd vs Dr Dean's above estimate of 3305000 bpd a difference of 462000 bpd. Wow that is a big difference.
Dean says: 12/29/2017 at 12:13 pm
Yes, it is unreal: either at the Texas RRC they had really HUGE problems in the past months collecting data, or the EIA used only model estimates without any form of revision.

The correcting factors of the Texas RRC have not changed much and they showed they usual variability, so that I cannot explain why there is such a big divergence between corrected RRC data and EIA. They only problem that I can think of (on the part of the RRC) is that the hurricane completely disrupted their work: does anyone know whether the offices and data servers of the Texas RRC were damaged during the hurricane? Thanks for the information.

Dean says: 12/29/2017 at 1:55 pm
I had a very interesting discussion on Twitter: operators in Texas confirmed me that the RRC offices were not affected by the hurricane and data reporting proceeded normally. At this point the only (legal) reason left to explain the divergence is that the EIA has started including NGL into their numbers:

https://twitter.com/ZmansEnrgyBrain/status/946796541406208000

[Jan 03, 2018] WTI might reach $90 in 2018

Beware this post has "confirmation basis" I am a believer in peak oil...
Notable quotes:
"... Was doing some tax work earlier today and noted for June 2017 oil we got $40.71 per barrel. If 12/29/17 close holds we get $56. $15.29 more on every barrel is huge for us as it is for everyone who operates wells Be it you XOM Harold Hamm Russia OPEC etc. As I recall oil prices rebounded in late 2016 then shale went nuts and the price tanked. Their shares tanked too as I recall. ..."
"... However I am then also sure that you just like us went from making a killing on low decline conventional and $90 oil to making much much less and in your case were using almost all cash to pay for new shale well AFE's. ..."
"... I am happy to see you want $70 even higher than me. So I'll leave you alone now. Take care. I think maybe deep down you too hope US doesn't ram through 10 and then 11 million BOPD next year? ..."
"... Cling to whatever makes you feel good dude. I guess when you're favorite industry produces a lot of product but can't make any profits doing so one has to find the silver lining wherever they can. Shale is a Ponzi scheme. It won't be long until the music stops and the investors lose their shirts. ..."
"... I agree with Mike that LTO producers are not profitable (as a group). I have suggested that if oil prices remain under $65/b (WTI price) that US output may increase by about 600 kb/d (average annual C+C output) in 2018 compared to 2017. If oil prices are higher output may be higher if you tell me what that average oil price will be in 2018 I can make a better output estimate. ..."
"... The oil price may improve in 2018. However it will likely go DOWN CONSIDERABLY first before it continues higher. According to the COT REPORT (Commitment Of Traders) there is a record Commercial Short Position against oil going back 23 years. ..."
"... You will notice right before oil fell from $100 in 2014 there was also a high amount of Commercial Short Positions. Today that level is even higher. ..."
"... WTI is refined to 6% Diesel while global crude average is 34% Diesel. ..."
Dec 31, 2017 | peakoilbarrel.com

shallow sand says: 12/31/2017 at 11:20 pm

Mike.

Unless I missed it I am still waiting for TT to explain how he finances the huge AFE's he must routinely get from $10+ million STACK and SCOOP wells.

Was doing some tax work earlier today and noted for June 2017 oil we got $40.71 per barrel. If 12/29/17 close holds we get $56. $15.29 more on every barrel is huge for us as it is for everyone who operates wells Be it you XOM Harold Hamm Russia OPEC etc. As I recall oil prices rebounded in late 2016 then shale went nuts and the price tanked. Their shares tanked too as I recall.

Say TT owns 10% of a shale monster well that cranks out 200K BO in year one. Say his NRI is 8%.

So he got billed $1 million for his part of the well. A $15 higher oil price nets him $240 000 more in year one before deducting severance tax.

So I assume TT would rather get an extra $240 000 in year one and have shale not go crazy talk and crazy drill again as opposed to being able to crow about political crap?

Mike do you know any non-op's on shale wells? How the heck do they finance them?

PS. I know you think it's cold down there in Texas but in my part of the Mid Continent it will be -5 F later tonight. 1 stinking degree F right now. Ouch!!

shallow sand says: 01/01/2018 at 8:43 pm
TT. If you came into shale with a lot of rock solid conventional paid for in full I can see how you could come up with the money.

However I am then also sure that you just like us went from making a killing on low decline conventional and $90 oil to making much much less and in your case were using almost all cash to pay for new shale well AFE's.

Even if you have zero debt I assume you at least have an un drawn credit facility just in case a good big deal were to arise. And therefore I assume you were none too pleased when your borrowing base dropped by more than 2/3 from 2014 to 2015 and again another 20+% in 2016 due to shale over production crashing oil and NG prices.

If you are big enough to cash flow several shale AFE I assume you have net production of somewhere between 2 000-10 000 BOEPD?

So let us say 5 000 BOEPD. Again just hypothetical to show what shale did to a larger private independent owned by maybe 2-4 shareholders who got very rich 2005-14.

2014 say you could have cashed out for $500 million. 2016 likely cashed out for 1/3 to 1/4 of that. Quite a hit to the net worth.

Further in 2014 you maybe cleared $90+ million pre income taxes before CAPEX on that 5 000 BOEPD? 2016 that went to $18 million maybe and of course you are getting AFE and JIB on the shale that is draining that the near zero? So no shareholder dividends or distributions in 2015 and 2016 after getting big ones in prior years.

We are small and not in a shale area but we have been around the block Dad has been in since the Arab Embargo. Pretty much everyone had to fire someone in 2015-16 it's good if you didn't. Pretty much everyone had the rug pulled out from under them just like in 1986 and 1998.

Thing is I think even most of the shale guys aren't real happy about shale. They know shale overproduction will drag the price. Same bittersweet deal as farmers growing a bumper crop. Farmers made the most $$ during 2012-13 even though most places 2012 was terrible drought. US commodity producers never do good during periods of oversupply. Just the middle men do good then.

Again I'm just speculating on how you do things numbers etc. I may be all wrong. If I am I apologize.

I just know in 2015 and 2016 there were a ton of shale wells completed that won't payout. Maybe not as many in 2017 but they are still out there. Further they hurt cash flow especially when you cannot control the expense recognition time frames as a non-op.

I am so glad we did not own non-op where drilling was going on 2015-17 as it would have sucked away all our cash and then some plus sold our flush production at market lows.

I am happy to see you want $70 even higher than me. So I'll leave you alone now. Take care. I think maybe deep down you too hope US doesn't ram through 10 and then 11 million BOPD next year?

Mike says: 01/01/2018 at 8:48 pm
Your 2% production tax in Oklahoma is going back to 7% tee tee; you and Mr. Blackmon are definitely on the same 'mindless' page regarding the future of shale oil: https://www.forbes.com/sites/davidblackmon/2017/12/31/the-oil-and-gas-situation-a-preview-of-2018/#7b9a4fe67613

You are insulting to people here who actually understand the basic arithmetic of the oil business a little better than you give them credit for. There is very clear mounting evidence that things are not getting better in your industry they are actually getting worse. You on the other hand seem to struggle with reality. Five days ago gas was trading at $2.55 per MMBTU not $4 and after royalty deductions interest expenses etc. etc. 5 BCF will not come close to paying for a $10-11M well. I understand now that even after 35 years of whatever it is you do you can't insult me anymore than you have already tried. I would have to value your opinion first.

If you want to win friends and influence people here on POB it would be helpful if you were to give us your name your company's name where these awesome wells are so we can check production data and tax roles etc. That would give you credibility and strengthen your arguments. Otherwise you are just a cute name embarrassing as that is to my beloved Texas who likes to brag about how much money he makes in the shale oil business. We're interested in the big picture here not you personally.

Boomer II says: 01/01/2018 at 9:30 pm
I still get the feeling that this is a sales job. Why tout the industry doing so great if you don't need investors and lenders?
Boomer II says: 01/01/2018 at 2:56 pm
I found this. It is from 2016 and it is based on privately held companies. Oil and gas extraction companies was the least profitable industry.

https://www.forbes.com/sites/sageworks/2016/10/03/the-15-least-profitable-industries-in-the-u-s/#2c690cbf618a

I just found the same article for 2017. Oil and gas still tops the list.

https://blogs-images.forbes.com/sageworks/files/2017/09/least-profitable-industries-ttm-07312017.png

Survivalist says: 01/01/2018 at 5:35 pm
@TT
Cling to whatever makes you feel good dude. I guess when you're favorite industry produces a lot of product but can't make any profits doing so one has to find the silver lining wherever they can. Shale is a Ponzi scheme. It won't be long until the music stops and the investors lose their shirts.
Survivalist says: 01/01/2018 at 7:01 pm
My credentials are irrelevant to the fact that shale oil is a profitless venture. If not for profit then what's it all about? Take a long hard suck on my ass fuck face. Fucking retard.
Survivalist says: 01/01/2018 at 7:33 pm
shale oil is a profitless venture. Deal with it fuck head.
Survivalist says: 01/01/2018 at 7:53 pm
Here's one for the Texas teabagger aka the Lone Star State scrotum sucker.Im guessing it didn't go to business school.
Lloyd says: 01/01/2018 at 11:28 pm
Until you post a name and a company you can't complain about anyone else's credentials. We know who Mike is. You are nameless likely lying and probably a charlatan. And the emojis prove you are a moron.
Lloyd says: 01/02/2018 at 10:57 pm
Watcher I didn't say he had to identify himself I just pointed out that he was a hypocrite to demand other people's credentials without presenting his own.

To the Teabagger I say "Put up or shut up." Though I do prefer "shut up".

-Lloyd

Dennis Coyne says: 01/02/2018 at 9:01 am
Hi Texas Tea

I agree with Mike that LTO producers are not profitable (as a group). I have suggested that if oil prices remain under $65/b (WTI price) that US output may increase by about 600 kb/d (average annual C+C output) in 2018 compared to 2017. If oil prices are higher output may be higher if you tell me what that average oil price will be in 2018 I can make a better output estimate.

I also agree with Mike that I do not know what the future oil price will be. Generally higher World output levels result in lower oil prices (as in 2015-2017) and generally lower oil prices result in lower profits for oil companies ceteris paribus.

SRSrocco says: 01/01/2018 at 10:35 am
Shallow

The oil price may improve in 2018. However it will likely go DOWN CONSIDERABLY first before it continues higher. According to the COT REPORT (Commitment Of Traders) there is a record Commercial Short Position against oil going back 23 years.

You will notice right before oil fell from $100 in 2014 there was also a high amount of Commercial Short Positions. Today that level is even higher.

steve

Energy News says: 01/01/2018 at 3:24 am
EIA Today In Energy: What are natural gas liquids and how are they used?
Table on Twitter: https://pbs.twimg.com/media/DSarQ0wUEAACODP.jpg
https://www.eia.gov/todayinenergy/detail.php?id=5930#
Energy News says: 01/01/2018 at 4:38 am
World demand for oil products – JODI Data – As everyone knows January is the seasonal low for demand. Comparing demand in December to January of the next year shows an average drop of -2.2 million barrels per day.

Chart on Twitter: https://pbs.twimg.com/media/DScZ25HX4AAdDwB.jpg

Longtimber says: 01/01/2018 at 2:54 pm
Rather Crude product sort out by molecular weight: WTI is refined to 6% Diesel while global crude average is 34% Diesel.
Survivalist says: 01/01/2018 at 8:06 pm
One more for the Texas Teabagger

https://www.bloomberg.com/news/articles/2017-11-01/fracking-boom-hits-midlife-crisis-as-investors-geologists-see-shale-limits

Watcher says: 01/02/2018 at 12:43 pm
George don't want to scroll way up.

Don't suppose you know if oil fields do blending prior to sending to assay? Doesn't seem too very conspiratorial. Someone could gin up a rationale and no one would complain provided the refiner gets the same blend as assayed.

George Kaplan says: 01/02/2018 at 2:32 pm
Most are blends – i.e. a bunch of producers discharge into a pipeline and what comes out the end is the cargo – it varies a bit depending on the relative flows from each platform and they might have to blend further in the tank farm (e.g. Forties delivers Brent crude I think from 15 to 20 different platforms).

I can only think of one time there might not be blending of some kind which is if an offshore platform with storage (e.g. FPSO) unloads as repeated cargoes which always go to one specific refinery (probably the platform operators – but even then there are usually more than one owner and they often take the cargos separately in proportion to their stake).

George Kaplan says: 01/02/2018 at 3:20 pm
https://www.researchgate.net/profile/Hassan_Harraz/publication/301842929_BENCHMARKS_OF_CRUDE_OILS/links/572a065b08aef7c7e2c4ede8/BENCHMARKS-OF-CRUDE-OILS.pdf

This is from 2015/2016 – but prices are still light/sweet -> expensive; heavy/sour -> cheap. The only thing that can mess that up is if there are transport bottlenecks which is why WTI is a bit cheaper than Brent (it wasn't before LTO came on line).

Tapis is still the lightest and costliest although almost none of it is produced it is still a useful benchmark against which other oil can be rated.

Although there are benchmark crudes I think every cargo is basically a negotiated price between the refinery and the producer (there can be penalties if it isn't quite the quality agreed on and it could even be rejected and I think there is an adjustment based on the latest benchmark prices as the contract price would have been negotiated well ahead of delivery). And that is about as much as I know about the trading business except there is a lot of money that can be made and lost on very small margins and variations.

Watcher says: 01/02/2018 at 6:26 pm
source of interest my recall of Bakken and Eagle Ford assays of yrs ago and how with an increase in API degs reported in the new assays the middle distillate yield hasn't changed. Should not be -- well it's possible but should not be likely.
Watcher says: 01/02/2018 at 1:16 pm
https://www.zerohedge.com/news/2018-01-02/peak-mexico
Energy News says: 01/02/2018 at 6:06 pm
US implied domestic demand monthly figures – seasonal

(Finished Motor Gasoline + Finished Aviation Gasoline + Kerosene-Type Jet Fuel + Distillate Fuel Oil + Residual Fuel Oil + Lubricants + Asphalt) but no NGLs

From here: EIA – Finished Petroleum Products – Products Supplied: https://www.eia.gov/dnav/pet/pet_sum_snd_d_nus_mbblpd_m_cur.htm

The January dip in demand table on Twitter

https://pbs.twimg.com/media/DSki1qFWsAAK6zX.jpg

Yearly averages & the year over year change. 2017 to Oct.

https://pbs.twimg.com/media/DSko0eLXcAEyl8L.jpg

Dennis Coyne says: 01/02/2018 at 6:35 pm
First chart from comment above

Dennis Coyne says: 01/02/2018 at 6:36 pm
Second chart in link from energy news. Thanks!

[Jan 03, 2018] WaPo propaganda

Jan 02, 2018 | peakoilbarrel.com

Cats@Home says: 01/02/2018 at 8:04 pm

U.S. oil production booms to start 2018
Updated 8:39 AM; Posted 8:39 AM

By The Washington Post

http://www.nola.com/business/index.ssf/2018/01/us_oil_production_booms_to_sta.html

U.S. crude oil production is flirting with record highs heading into the new year thanks to the technological nimbleness of shale oil drillers who have unleashed the crude bonanza.

The current abundance has erased memories of 1973 gas lines which raised pump prices dramatically traumatizing the United States and reordering its economy. In the decades since presidents and politicians have mouthed platitudes calling for U.S. energy independence.

President Jimmy Carter in a televised speech even compared the energy crisis of 1977 to "the moral equivalent of war."

"It's a total turnaround from where we were in the '70s " said Frank Verrastro senior vice president at the Center for Strategic and International Studies.

Shale oil drills can now plunge deep into the earth pivot and tunnel sideways for miles hitting an oil pocket the size of a chair Verrastro said.

The United States is so awash in oil that petroleum-rich Saudi Arabia's state-owned oil and natural gas company is reportedly interested in investing in the fertile Texas Permian Basin shale oil region according to a report last month.

That is a far cry from the days when U.S. production was on what was thought to be an irreversible downward path.

"For years and years we thought we were running out of oil " Verrastro said. "It took $120 for a barrel of oil to make people experiment with technology and that has been unbelievably successful. We are the largest oil and gas producer in the world."

The resilience of U.S. oil producers has come as the price of crude rose above $60 per barrel on world markets. Many shale drillers can start and stop on a dime depending on the world oil price. The sweet spot for shale profit is in the neighborhood of $55 to $60 per barrel.

[Jan 03, 2018] No major discoveries in 2017

Notable quotes:
"... Rystad Energy concluded this week that 2017 was yet another record low year for discovered conventional volumes globally. Less than seven billion barrels of oil equivalent has been discovered YTD. "We haven't seen anything like this since the 1940s," says Sonia Mladá Passos, Senior Analyst at Rystad Energy. "The discovered volumes averaged at ~550 million barrels of oil equivalent per month. The most worrisome is the fact that the reserve replacement ratio* in the current year reached only 11% (for oil and gas combined) – compared to over 50% in 2012." According to Rystad's analysis, 2006 was the last year when reserve replacement ratio reached 100%; largely thanks to the giant onshore gas field Galkynysh in Turkmenistan. Not only did the total volume of discovered resources decrease – so did the resources per discovered field. An average offshore discovery in 2017 held ~100 million barrels of oil equivalent, compared to 150 million boe in 2012. "Low resources per discovered field can influence its commerciality. Under our current base case price scenario, we estimate that over 1 billion boe discovered during 2017 might never be developed", says Passos. ..."
"... We have recently observed strong empiric evidence for the theory that a positive tendency in initial production rates for shale wells does not always lead to similar improvements in ultimate recovery. ..."
"... But profits and stock valuations are terrible over the past five to ten years. Drillers, Explorers, Services, I'd be shocked if you could find an index combo that has come even close to matching S&P, Biotech, Semiconductors, NASDAQ. Not positive but E&P et al might not even have beaten transportation over the past decade. If you've been invested in Oil and Gas you are officially a loser. ..."
"... The cooperative program and understanding between the Kingdom and Russia, the two largest producers in the market. ..."
"... Last but not least, we need to develop a culture of saving to increase our capital buildup for the economy. This is not an easy task, and requires a total rehabilitation of our consuming behavior." ..."
"... At this posting, New England is burning oil for 17% of their electricity generation. Wholesale spot price for electricity is $230/Mwh, about 10 times regular pricing. Later this afternoon, demand is expected to increase more. ..."
Dec 21, 2017 | peakoilbarrel.com

George Kaplan, says: 12/21/2017 at 6:55 am

https://www.rystadenergy.com/NewsEvents/PressReleases/all-time-low-discovered-resources-2017

ALL-TIME LOW FOR DISCOVERED RESOURCES IN 2017: AROUND 7 BILLION BARRELS OF OIL EQUIVALENT WAS DISCOVERED

Rystad Energy concluded this week that 2017 was yet another record low year for discovered conventional volumes globally. Less than seven billion barrels of oil equivalent has been discovered YTD.

"We haven't seen anything like this since the 1940s," says Sonia Mladá Passos, Senior Analyst at Rystad Energy. "The discovered volumes averaged at ~550 million barrels of oil equivalent per month. The most worrisome is the fact that the reserve replacement ratio* in the current year reached only 11% (for oil and gas combined) – compared to over 50% in 2012."

According to Rystad's analysis, 2006 was the last year when reserve replacement ratio reached 100%; largely thanks to the giant onshore gas field Galkynysh in Turkmenistan.

Not only did the total volume of discovered resources decrease – so did the resources per discovered field.

An average offshore discovery in 2017 held ~100 million barrels of oil equivalent, compared to 150 million boe in 2012. "Low resources per discovered field can influence its commerciality. Under our current base case price scenario, we estimate that over 1 billion boe discovered during 2017 might never be developed", says Passos.

I think every drilled high impact wildcat well identified by Rystad at the end of 2016 has now turned out dry, with a couple postponed for lack of finance.

Dennis Coyne, says: 12/21/2017 at 8:14 am
Thanks George.

It would be great if they gave the gas/liquids split all rolled up. Does it look to your eyes like a roughly 50/50 gas/liquids split in 2017, as it does to mine? (Talking about Rystad chart.)

SouthLaGeo, says: 12/21/2017 at 8:38 am
2017 looks likes another very disappointing year for conventional discoveries. I wonder how unconventional resource adds have been over the last few years. I suspect that is how many of our big oil friends are achieving their annual resource add goals.
George Kaplan, says: 12/21/2017 at 8:50 am
The EIA reserves are going to be interesting: even before the price crash the extension numbers, which is where all the LTO growth came from rather than discoveries, were starting to fall and reserve changes looked like they might be going negative, which I'd guess is due to decreases in URR estimates; e.g. below for Bakken.

George Kaplan, says: 12/21/2017 at 8:50 am
And EF.

George Kaplan, says: 12/21/2017 at 8:54 am
About 50/50, maybe slightly more gas because of the big BP find, which I thought was 2.5Gboe but they have as 2.
Dennis Coyne, says: 12/21/2017 at 10:54 am
Thanks George,

Yes reserves decreased in 2015, probably due (in part) to a fall in oil prices from $59/b in Dec 2014 to $37/b in Dec 2015, the price in Dec 2016 was $52/b, using spot prices from the EIA, so perhaps reserves increased a bit in 2016, it will be interesting to see the 2016 estimate.

George Kaplan, says: 12/22/2017 at 3:22 am
I think they have to use averages for determining economic recovery not spot prices – I can't remember now if it's six month or annual (or other – I think maybe six months to March and September when they reevaluate) – 2016 would be bout the same or a bit lower depending on the time frame.
Dennis Coyne, says: 12/22/2017 at 8:59 am
Hi George,

I am not sure exactly how it works.

I found this:

https://sprioilgas.com/sec-oil-and-gas-reserve-reporting/

Initially, SEC rules required a single-day, fiscal-year-end spot price to determine a company's oil and gas reserves and economic production capability. The SEC Final Rule changes this requirement to a 12-month average of the first-of-the-month prices.

Using this I get
2014, 101
2015, 54
2016, 42

So 2016 reserves should decrease further if prices affect reserves.

George Kaplan, says: 12/21/2017 at 6:56 am
EIA reserve estimates were due at the end of November, but still haven't appeared, maybe they don't look so good?
Dennis Coyne, says: 12/21/2017 at 8:15 am
Hi George,

Last year it was mid Dec, maybe at the end of the year. Not sure why it takes so long as these are 2016 reserves as of Dec 31, 2016.

George Kaplan, says: 12/21/2017 at 6:59 am
https://www.rystadenergy.com/NewsEvents/Newsletters/UsArchive/shale-newsletter-december-2017

EMPIRICAL EVIDENCE FOR COLLAPSING PRODUCTION RATES IN EAGLE FORD

We have recently observed strong empiric evidence for the theory that a positive tendency in initial production rates for shale wells does not always lead to similar improvements in ultimate recovery.

Cabot announced they are selling up in the EF and concentrating on gas (15,000 bpd), maybe more likr them to come.

Fernando Leanme, says: 12/21/2017 at 10:14 am
I have had to work hard over the years to explain to management that oil completions have to be optimized, and that seeking the highest peak rate wasn't likely to be the best answer. This of course happens because high level oil company managers are good at sales and PowerPoint, but have opportunities for improvement in key areas.
Dennis Coyne, says: 12/22/2017 at 2:38 pm
Hi George,

Great article, thanks.

This confirms the suspicion of many that the high peak rates on newer wells (often with longer laterals and more frack stages and proppant, in short more expensive wells) don't boost cumulative output much. In the case of the Eagle Ford, wells in Karnes county (the core of the play) only increased output by about 40 kb over the older wells with less expensive completion methods.

Looking at Bakken data, it is clear that this is the case as well, with about a 10%to 15 % increase in cumulative output over the first 24 months and then similar output to older wells thereafter.

Many observers assume that a higher peak production from a well leads to higher cumulative output of the same proportion. That is if the peak goes from 400 kbo/d for a well projected to have an EUR of 200 kbo to a peak of 800 kbo/d for a newer well, it is often assumed that the new well will have cumulative output of 400 kbo. This is incorrect, in fact the newer well is more likely to have an output of 240 kbo an increase of only 20% rather than the 100% often assumed.

Ron Patterson, says: 12/25/2017 at 7:00 am
Another article citing that same Rystad report:

Shale Growth Hides Underlying Problems

However, Rystad Energy argues that there is some evidence that suggests those higher initial production (IP) rates do not necessarily translate into larger gains in the total volume of oil and gas that is ultimately recovered. A sample of wells in the Eagle Ford showed steadily higher IPs in recent years, but they also exhibited steeper and steeper decline rates.

George Kaplan, says: 12/21/2017 at 7:16 am
It seems a bit unlikely that Canada is going to continue increasing production as shown above over the next 6 to 8 years (after 2018 ramp ups are complete). There are no major greenfiled developments currently under construction and these take at least 5 years from FEED to production, there are continuing redundancies in the oil patch as some of the large, recent developments move from development to operations, and there is no spare pipeline (or rail) capacity such that the oil is at about $10 to $15 discount which is likely to increase as Fort Hill's ramps up through next year (and new pipeline permitting and construction is likely to take even longer than the actual oil sands project).

With Iran and Iraq – they may have oil in the ground, but they need huge,new surface production facilites to process it and supply water/gas for injection – those too take about 5 years to construct, assuming they can find some outside funding.

FreddyW, says: 12/23/2017 at 5:31 am
Dennis,

"OPEC has already demonstrated it can produce more, before they cut back in Jan 2017"

Yes OPEC may have some capacity to increase production. But many OPEC countries are in decline and Saudi Arabia does not have any Khurais or Manifa like fields left to develop. If I ruled Saudi Arabia then I wouldn´t produce more than 10 mb/d even if there were shortages. Better to stay on the platau a little bit longer. Iraq is the country with the biggest possibilities for increases. But they will do so when they are able to, not because of shortages. The other countries you mentioned have mainly expensive oil like tar sands in Canada, arctic in Russia and ultra deepwater in Brazil. Sure we can see increases there but it takes a long time to develop.

"I don't think oil producers were struggling at $100/b, they were overproducing so prices dropped."

US LTO increased production. But conventional prioduction not so much (outside OPEC). Remember this?
https://www.ft.com/content/35950e2a-a4be-11e3-9313-00144feab7de
(google for "ExxonMobil targets $5.5bn spending cuts")

"There's also rail, ridesharing, telecommuting, public transportation etc. High oil prices will lead to changes."

Yes I agree on that. Changes will have to happen.

Dennis Coyne, says: 12/26/2017 at 2:20 pm
Hi Tech guy,

http://www.imf.org/external/datamapper/NGDP_RPCH@WEO/WEOWORLD

World real economic growth has been about 3.5% per year since 2012.

https://www.bis.org/statistics/totcredit.htm?m=6%7C380%7C669

For the World Debt to GDP has increased from 226% in 2012 to 243% in 2Q2017, for advanced economies over the same period debt to GDP went from 272% to 275% and for emerging economies over the same period 145% to 190%.

The story is better access to credit for emerging economies from 2012 to 2017.

A major recession is not very likely.

The IMF forecasts real GDP growth of 3.75% for the World from 2018 to 2022.

Dennis Coyne, says: 12/27/2017 at 5:12 pm
Hi Techguy,

Oil prices at over $100/b were no problem for the World economy from 2011-2014, real GDP grew at 3.5% per year. No reason $100/b oil would cause a recession.

The $160/b (2017$) will only be about 3.3% of World GDP in 2026, assuming medium UN population growth scenario and real per capita GDP growth at 1.5%/year and 84 Mb/d C+C output in 2026.

That's a lower level than 2014.

George Kaplan, says: 12/21/2017 at 7:25 am
https://www.eia.gov/petroleum/weekly/

There was another big drop in US crude stocks by the twip – down 6.5 mmbbls with gasoline and diesel up 2 mmbbls combined. The crude level is fast approaching the middle of the 5 year average – how far does it have to undershoot before panic sets in?

Jeff, says: 12/21/2017 at 9:05 am
US SPR drawdown this year is about 21.5 million barrels, this is usually not included when calculating the 5y average. Planned annual sales are similar for the next couple of years ( https://www.eia.gov/todayinenergy/detail.php?id=29692 note that the figure shows fiscal year).

The story being told is that oil markets should be in balance next year or slight surplus if LTO maintains its pace. KSA low production during end of 2017 and the problems in Venezuela should result in continued stock drawdowns or only a small build during the spring (forties supports this too). Next summer driving season can be interesting, assuming the economy remains healthy. 2019 will be _very_ interesting since it will be revealed how much of the OPEC cuts were made voluntary.

Heinrich Leopold, says: 12/21/2017 at 4:49 pm
As inventories are still way above historical averages, it is important to bear in mind that substantial infrastructure in form of tanks and pipelines have been constructed over the last few years. This increased the necessary working inventory to keep the system functioning. So, the critical inventory level might be much higher than in previous years.
George Kaplan, says: 12/22/2017 at 3:26 am
They need a minimum amount of empty capacity to allow for blending and movement, not a minimum amount of stored volume to keep it working. The storage is to cover for upsets and to allow people to make money from arbitrage.
FreddyW says: 12/22/2017 at 5:39 am
You are wrong on this point. See
https://www.reuters.com/article/us-oil-storage-kemp/should-we-worry-as-oil-stocks-hit-3-billion-barrels-kemp-idUSKCN0T92PP20151120

The lowest value the commercial oil stocks have been since 1982 was 247 mb in 2004:
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCESTUS1&f=W

It was propably close to the point where it was low enough to cause problems at that time. Why? Because from a commercial point of view, it´s just stupid to have more storage than you need. It´s cost money to store it and it´s better to sell it and get the money instead of just having it in storage. Also there is the SPR from where you can get oil if there is supply problems. So really no need to have large amounts of oil in storage.

George Kaplan, says: 12/22/2017 at 3:26 am
I was speculating about future undershoot, not current conditions.
Dennis Coyne, says: 12/22/2017 at 9:34 am
Hi George,

Yes that was how I interpreted your original comment. At least for US commercial crude stocks for the current week we are currently about 95 million barrels above the 2012 and 2013 average for the same week of the year, so perhaps another few years before any panic if stocks continue to decrease by 50 Mb per year as they did from 2016 to 2017. I chose 2012 and 2013 because oil prices were relatively high in 2012 and 2013 ($88/b and $98/b in Dec 2012 and Dec 2013 for WTI).

On rereading your original comment, I think when it gets near the lower edge of the 5 year average, panics sets in, it may take a few years.

Longtimber, says: 12/21/2017 at 4:17 pm
http://www.zerohedge.com/news/2017-12-20/another-governor-demands-state-pension-abandon-fiduciary-duties-sell-fossil-fuel-inv
A factor in Future production if Pension Shale Patch backing is reduced? A sample position breakout in there.
texas tea, says: 12/22/2017 at 8:03 am
"You can just say it is an industry in decline and there are better places to put one's money in." yes you can say "the industry is in decline" but then you would be wrong, not usual for you or many on the board. In this case however, the statement is not only wrong but delusional. Both production and demand are at record highs for oil natural gas and natural gas liquids. Of course why let facts get in the way of your political views, to quote a old line; fat, drunk and stupid in no way to go through life, son 😜
twocats, says: 12/22/2017 at 2:03 pm
"Both production and demand are at record highs for oil natural gas and natural gas liquids. "

But profits and stock valuations are terrible over the past five to ten years. Drillers, Explorers, Services, I'd be shocked if you could find an index combo that has come even close to matching S&P, Biotech, Semiconductors, NASDAQ. Not positive but E&P et al might not even have beaten transportation over the past decade. If you've been invested in Oil and Gas you are officially a loser.

Now, high yield bonds might be a different story. But in the wake of all the bankruptcies for the past five years was 100% of all bonds paid? They might have been, not sure.

Boomer II, says: 12/22/2017 at 6:40 pm
Oil companies themselves have changed the way they are investing. So I take that as a sign they, too, think their best times are behind them.

In terms of financial management, there are industries that have done better and are likely to do better than gas and oil. It's simply not a growth industry anymore.

Dennis Coyne, says: 12/24/2017 at 8:44 am
Hi Boomer II,

I think oil prices have an effect on investment, especially outside the LTO focused companies. For the LTO players they seem to focus on output growth regardless of profits, not a great long term business model.

David Archibald, says: 12/21/2017 at 10:10 pm
Regarding the gap, a third of the consumption growth over the last decade was from China. If Chinese consumption plateaus, as it very well might, then consumption growth from here will be less and the gap smaller. But putting in an assumption to change an established trend would just add another point of failure. This piece isn't so much a model as a creation story, trying to figure out why past expectations weren't met and where the known unkowns might come from. A big one of these is what the Permian might end up doing. I think that is why industry is paying up to get into the Permian. If you are not in the Permian you don't have a future. And shareholders will pay any amount of money for you to keep your job.

The piece was prompted by Ovi's observation that Non-OPEC less the big three has been in decline since 2004 – very encouraging. There are some systems in which a price rise does not result in an increase in production simply because the resource is clapped out. The gold market last decade for example. The gold price rose at an average of about 17% per annum year after year but gold production fell. That is not supposed to happen. Now some mines are digging up rock with just over one part in a million of gold in it and that pays for turning that rock into mud.

Paul Pukite (@WHUT), says: 12/21/2017 at 10:57 pm

David Archibald says

https://www.mediamatters.org/blog/2014/04/14/meet-david-archibald-the-fringe-scientist-predi/198886

Hickory, says: 12/22/2017 at 11:30 pm
Thanks Paul. Good to know the bias of the author.
Watcher, says: 12/22/2017 at 2:11 am
There was a July report for China imports that extrapolated to another 6.6% consumption growth year for them. No evidence of slow down. Ditto India.

Reminder to folks because it is a tad obscure. India's consumption growth is 8% but it's concentrated in an unusual way. LPG. They run motors on LPG, mostly motorbikes.

Watcher, says: 12/23/2017 at 2:24 am
https://fred.stlouisfed.org/series/M12MTVUSM227NFWA/

Vehicle miles driven. The increase is relentless as is US population growth. In the big smash of 2008/2009 there was a flattening of the increase but not really any sort of collapse. There was in oil price, but there was no need for it since consumption did not decline more than 5%. A quick look at historical consumption not just miles driven shows essentially the same tiniest of down ticks during that timeframe.

So I would say we need a new theory as to why price declines during recession. Doesn't appear to be less driving to work.

OFM, says: 12/23/2017 at 8:23 am
Consumption of oil would seem to decline a little bit right across the board during a recession, especially a big one. Construction machinery runs less, people travel less, buy fewer new things. It doesn't take very much by way of falling consumption to reduce the price of oil. The price of oil is highly inelastic, in the short term, and it's like milk.

The price of milk has to fall a long way before you can find uses for more than the usual amount.

People buy as much milk as they want for their kids, and maybe a little to cook with. NO MORE, even if the price goes down a lot. They don't have any use for it. So .. if it's coming to market, it has to sell cheaper in order for people to FIND uses for it. You can feed milk to the cat, and even to the pigs, if it's cheap enough. Farmers have been feeding excess milk to pigs just about forever, lol. I did so myself when we had more than we could use otherwise when I was a kid.

So . if the price of gasoline falls, maybe you take the ski boat to the lake one extra weekend , which can easily result in burning a couple of hundred gallons, round trip, as opposed to spending the weekend golfing at a cheap nearby course.

Or you drive the old car that's a gas hog more, because it saves putting miles on a newer car. When the price of gasoline bottomed out, I drove my old four by four truck a lot more than I would have otherwise, because I knew I would be retiring it before long, and wanted to get as many miles out of it as I could, saving wear and tear on the car .. which I'm planning on keeping indefinitely.

It broke down yesterday, and while it's not quite dead, I 'm thinking it's time to euthanize it, lol.

I'm also running my big yellow machines a lot more than usual, because when diesel is down close to two bucks, as opposed to four bucks or so, this saves me a hundred bucks a day, or more, if I stay with it, and I've got some pretty big long term projects such as a new lake, which I work on at odd times, whenever circumstances permit.

IF I were hiring out, which I don't , I would be able to offer a neighbor a hundred bucks or more off for a days work, with diesel at two, as opposed to four bucks. That would result in neighbors with cash, and thrifty Scots habits, spending some of their savings, doing long planned work sooner, or maybe going for a new small project.

Overall though construction falls off during a recession.

Most of the increase in total miles happens as the result of people driving new cars, and by and large, new cars and light trucks are far more fuel efficient than old ones.

And people who are broke spend as much on gasoline as they can afford, period. They MUST spend to get to work. If a tank at twenty bucks will get them to Grandma's house and back in their old clunker, they go. A tank a forty bucks often means calling rather than visiting.

Krisvis says: 12/23/2017 at 10:04 am
It is pretty much a given that Permian oil needs export market. This is from PAA conference call.

" PAA comments: If you look at the amount of 45-plus gravity. It's about 300,000 barrels a day now, growing to 1 million plus. So, a lot of those volumes are coming, and that's really the crux of the benefit of a Cactus pipeline being able to take that directly to the water because I think we are going to see a lot of pushback from refiners. We are already starting to see it as far as the lightning of the general stream going up to Cushing.

The refiners don't want any lighter. So, it's an integral part of the strategy and a piece of everything we've been building."

Delaware basin produces 56% oil that is greater than API gravity 50 plus according to Woodmac.

Every week I see announcements to export US oil. Here are some.

https://www.businesswire.com/news/home/20171206005367/en/Wolf-Midstream-Partners-Plans-New-Permian-Basin#.Wik_YewJKuc.twitter
https://www.upi.com/More-US-oil-export-capacity-in-the-works/8051512568297/?spt=su&or=btn_tw
https://www.businesswire.com/news/home/20171222005375/en/EPIC-Announces-Approval-New-Build-730-mile-Permian

HuntingtonBeach, says: 12/24/2017 at 2:34 am
"OPINION-
Don't be taken in by the surge in oil prices

But oil prices have continued to be volatile. They went down from $114 per barrel in June 2014 to $26 per barrel in early 2016 and moved gradually upward to touch $64 per barrel in late November 2017. On the other hand, economic forecasts expect oil prices to continue to rise to a range of between $70 to $80 by the end of the first quarter of 2018. Futurists in the field base their expectations on the following indicators:

1) The cooperative program and understanding between the Kingdom and Russia, the two largest producers in the market. 2) The continuation of efforts to reduce oil surplus in the market 3) The agreement among OPEC members and some non-members to continue their programs of production reduction up to the end of 2018. 8. Last but not least, we need to develop a culture of saving to increase our capital buildup for the economy. This is not an easy task, and requires a total rehabilitation of our consuming behavior."

http://www.saudigazette.com.sa/article/524652/Opinion/OP-ED/Dont-be-taken-in-by-the-surge-in-oil-prices

Heinrich Leopold, says: 12/27/2017 at 10:04 am
Interesting development for natgas: Iroquois zone 2 spot prices just shot up to over 32 USD per mcf. This is nearly 1000% up from last month. As much depends now on the future weather, it shows how volatile the US gas market can be – despite massive efforts towards more supply.

As the industry has completely shifted the supply from the South to the Northeast, hurricanes are no more a threat to supply, yet freeze offs become now a major issue. Previously just the supply of the Rockies has been hampered by freeze offs. As this concerned just 10% of US total production, this has never been an issue for gas supply. However, as currently 70% of supply comes from the Northeast and the Rockies, freeze off could lead to serious supply disruptions, if the freeze continues.

The next weeks could now be very interesting.

coffeeguyzz, says: 12/27/2017 at 11:07 am
Not freeze offs, simply lack of pipeline capacity in the face of unprecedented demand. When the receipt figures from the various transfer points are published, they should show 100% capacity utilization.

At this posting, New England is burning oil for 17% of their electricity generation. Wholesale spot price for electricity is $230/Mwh, about 10 times regular pricing. Later this afternoon, demand is expected to increase more.

The supply is there in the pipelines, Mr. Leopold, there just isn't enough of them to satisfy demand during this cold spell.

Heinrich Leopold, says: 12/27/2017 at 11:47 am
Coffee,

I was expecting your reply. Thanks for your opinion.

Nevertheless, there has been huge infrastructure spending over the last years. The pipelines should be already in place.

However, freeze offs are not an issue just yet. If the gas wells freeze off later in the week (temperatures are going to zero down until Cincinnati) , the shortage of supply may be really a concern. There is just one week left and we know it.

This is one of the structural weaknesses of Shale gas:you probably do not have it when you need it the most.

coffeeguyzz, says: 12/27/2017 at 12:35 pm
Mr. Leopold

The pipelines that have been completed greatly favor delivery west to southwest from the Appalachian Basin.

The Atlantic Sunrise is being built that will deliver into the NYC area via a hookup with Transco, I believe.

Deliveries to the north, that is New York State and New England have been virtually nil.

Yes, the storage aspects of all gas products is a challenge, and – as you mentioned – the coming cold days will highlight the vulnerabilities of the situation, sadly, at great expense to many.

[Jan 03, 2018] Possibible commection between oil prices and the US trade deficit.

Jan 03, 2018 | peakoilbarrel.com

Heinrich Leopold says: 12/21/2017 at 6:44 am

The main catalyst for more oil demand and higher oil prices is actually the US trade deficit.

A high US trade deficit weakens the US dollar and thus ignites higher worldwide growth and oil demand.

This is why Shale condensate production is so important as it reduces the US trade deficit.

[Jan 03, 2018] Is fracking gas production in the USA is sustainable, or this is yet another "subprime" bubble?

Jan 03, 2018 | www.nakedcapitalism.com

likbez , January 3, 2018 at 5:10 pm

Are companies which produce it profitable or they survive by generating a parallel stream of junk bonds and evergreen loans?

Most of them are also shale oil producers and might well depend on revenue from shale oil to produce gas. Shale oil proved to unsustainable at prices below, say $65-$75 per barrel or even higher, excluding few "sweet spots". Also a lot of liquids the shale well produce are "subprime oil" that refiners shun.

They are not only much lighter but also they have fewer hydrocarbons necessary for producing kerosene and diesel fuel. Mixing it with heavy oil proved to be double edged sword and still inferior to "natural" oil. So right now the USA imports "quality" oil and sells its own" subprime oil" at discount to refineries that are capable of dealing with such a mix. Say, buying a barrel for $60 and selling a barrel of "subprime oil" at $30.

And without revenue from oil and liquids it can well be that natural gas production might be uneconomical.

I wonder what percentage of the total US oil production now is subprime oil.

Modern multistage shale well now cost around $7-10 million. And that's only beginning as its exploitation also costs money (fuel, maintenance, pumping back highly salinated and often toxic water the well produces, etc). So neither oil nor gas from such wells can be very cheap.

Generally such a well is highly productive only the first couple of years. After that you need to drill more.

Also there is a damage to environment including such dangerous thing as pollution of drinking water in the area,

[Jan 03, 2018] If global oil demand increases by around 1.5mbld as it has done over the last few years then $90 + oil is very possible in 2018. Obviously it also depends on how strongly US tight oil grows and what OPEC will do.

Notable quotes:
"... In the oil business debt is having stage 2,3 or 4 cancer. Ignoring its treatment is not the cure. Again, take Shallow's CLR's diagnosis: it has $6.6B of debt and only $10M of COH. If independently audited its reserves would not cover its long term debt. It is basically insolvent. It belongs in Hospice Care. You are relying on corporations like that to make your predictions come true. ..."
"... If global oil demand increases by around 1.5mbld as it has done over the last few years then $90 + oil is very possible. Obviously it also depends on how strongly US tight oil grows and what OPEC will do. ..."
"... At the moment US growth and OPEC spare capacity could drive down prices again. I believe in around 3 years time there will be very little OPEC spare capacity and increases from the US, Canada, Brazil, Iraq new developments etc will not be able to meet the extra demand. ..."
"... The big factors for future energy costs is the lack of CapEx in replacing consumption and the lack of finding replacement reserves. A lot of big western projects that would have replaced depletion were cancelled. Western Oil companies opted to drill in Wall Street (ie Stock buybacks) or buying up smaller companies instead of developing newer fields (Artic and Offshore). ..."
"... I suppose sooner or later Middle East Producers will follow the Western Oil Companies by choosing to Drill Wall Street instead (ie the Saudi Aramco IPO). ..."
"... So you own your country, as a practical matter, and you therefore own your own ( national ) oil company. Oil's cheap. You expect it to STAY cheap for years. But maybe you know a buyer that will pay you a hell of a lot of money for your oil company, fifty times, a hundred times, maybe , the net cash flow you're getting after paying the oil company's expenses. Now if you were an ordinary businessman, such as the ones with an MBA from any of the Ivies, you would sell in a flash, and take that cash and put it into another business. ..."
"... I'm as far from an expert as east is from west, but according to everything I read, investment in the oil industry is at very low levels, world wide, and oil wells are like apple trees Ya gotta have new ones, cause the old ones quit on ya. ..."
Jan 03, 2018 | peakoilbarrel.com

x says: 12/23/2017 at 7:09 am

Dennis, I am not capable of predicting what the price of oil is going to be in six months, much less six years. Neither are you. Shallow and Fernando, both oily folks, might state a "range" scenario but if you were to pen them down they'd likely say they don't know either.

If the predictor of our hydrocarbon future has to "qualify" those predictions based on what the price of oil might be, I am sorry, I don't see the point in the prediction at all. You, Mr. Archibald, and many others all miss the point entirely with regard to LTO growth in America. You assume that because LTO has grown, it will continue to grow. You focus on oil prices to make your predictions come true and ignore, entirely, that shale oil extraction in America is not nationalized, it is managed by private enterprise. Private enterprise must succeed, it must be profitable enough to drill new wells from old wells. Now, because of poor business decisions in the past the US LTO industry must manage its old debt, ultimately pay down that old debt AND create sufficient net cash flow to drill new wells without getting further in debt. It cannot do that at prices short of $100 or more for a sustained period of time. It is a business, Dennis; I am sorry you cannot seem to grasp that.

In the oil business debt is having stage 2,3 or 4 cancer. Ignoring its treatment is not the cure. Again, take Shallow's CLR's diagnosis: it has $6.6B of debt and only $10M of COH. If independently audited its reserves would not cover its long term debt. It is basically insolvent. It belongs in Hospice Care. You are relying on corporations like that to make your predictions come true.

I suggest you quit worrying about the price of oil and start focusing on profitability and debt. You seem to embrace debt as being acceptable in the reserve growth LTO business model. That is a very bad mistake, a mistake common to people that have never been in the oil "business," that must write checks, receive revenue from the sale of oil and gas production and be profitable. Or not eat.

Instead I suggest you focus on where the money is going to come from to keep funding this miracle of US LTO growth. That growth potential is not price sensitive, it is capital sensitive.

Mike says: 12/24/2017 at 12:06 pm
Rune has a good handle on it all, indeed. Regarding LTO debt and new tax laws, he was kind enough to recently send me this:

https://wolfstreet.com/2017/12/22/what-will-the-tax-law-do-to-over-indebted-corporate-america/

Merry Christmas, Dennis.

Peter says: 12/22/2017 at 3:27 am
Hi Dennis

If global oil demand increases by around 1.5mbld as it has done over the last few years then $90 + oil is very possible. Obviously it also depends on how strongly US tight oil grows and what OPEC will do.

At the moment US growth and OPEC spare capacity could drive down prices again. I believe in around 3 years time there will be very little OPEC spare capacity and increases from the US, Canada, Brazil, Iraq new developments etc will not be able to meet the extra demand.

Many people do not realise how many electric vehicles would have to be sold to cope with a world where oil production stops growing. About 30 to 40 million of the 100 million vehicles would have to be fully electric, hybrids would not be enough.

TechGuy says: 12/26/2017 at 1:56 am
Peter Wrote:

"Global demand has been slowing down in recent years, so the graph does not show a gap of 8 million between demand and supply."

Seems likely that global demand will likely to decline as Western & Asia populations continue to grow older. Currently the global economy has been propped up by ZIRP and lots of QE (China, Japan, EU, & US). Worldwide Debt has nearly doubled since 2008 due to cheap & easy credit. Sooner or later there will another global recessions that forces a reduction in Oil demand.

The big factors for future energy costs is the lack of CapEx in replacing consumption and the lack of finding replacement reserves. A lot of big western projects that would have replaced depletion were cancelled. Western Oil companies opted to drill in Wall Street (ie Stock buybacks) or buying up smaller companies instead of developing newer fields (Artic and Offshore).

I suppose sooner or later Middle East Producers will follow the Western Oil Companies by choosing to Drill Wall Street instead (ie the Saudi Aramco IPO).

My guess is that Oil pricing does not increase much (excluding geopolitical events/natural disasters) over the next 2 years. I think the odds favor a decrease in prices and consumption over the next 2 years caused by another global recession: Interest rates are rising at a time when consumers are borrowing more to meet ends, and consumers savings rates are near zero (perhaps going negative again).

OFM says: 12/21/2017 at 4:34 am
I don't do any modeling and number crunching. Couldn't even if I wanted to, due to lack sufficient statistical and computer skills.

But I don't see where all this new production is supposed to come from, without the price going up. There's nothing in the news I read here, or at a number of other places, indicating that any huge new fields that are going to be cheap to produce have been discovered in recent times, and are in the process of being developed.

So how is it that new production adequate to offset the inevitable decline of the huge older fields that still supply the bulk of the oil, PLUS enough more to actually increase production somewhat, can be achieved without the price going up quite a bit?

Where's the new CHEAP oil supposed to come from, considering that oil companies these days are going after ever smaller and more expensive to produce fields ?

Some of my neighbors, and some of my family members, have amazed everybody who knows them, including their physicians, by continuing to be productive workers right on into their eighties.

But when they did finally " decline " or "deplete" they went down hill pretty damned fast. Men and oil fields are subject to the SENECA CLIFF.

I disagree with our honorable and esteemed founder Ron Patterson about the odds of some of us pulling thru the coming bottleneck more or less whole, but I'm of the opinion he's right about a lot of production being maintained these days by practices such as infield drilling and water flooding and so forth that will result in pretty sharp declines in production at many major oil fields sometime in the not very distant future.

Maybe the people who think like Tony Seba are right, and our need of oil is peaking now, or will peak, very soon. I don't see it happening within the next ten years though, because I just don't see electric vehicles displacing oil burners so quickly, considering the size of the vehicle fleet, and the number of relatively new ICE cars that will continue to be sold for some years yet.

Matt Simmons was ahead of his time, like a lot of people who are hailed as visionaries after they're gone, but he nailed it when he said rust and depletion never sleep.

Demand for use as auto and light truck fuel may indeed peak and plateau in rich western countries, but unless the world wide economy goes sour, demand overall won't peak until batteries or fuel cells get to be fully competitive in up front terms.

Money has a hell of a lot of time value, and most people aren't going to lay out a lot of money up front unless they earn an excellent return by doing so . This is particularly true in the case of small businesses and the large majority of individuals, because they don't HAVE a lot of money to lay out up front, and lack good enough credit to borrow enough to pay a significant premium for an electric vehicle, considering their other needs for borrowed money.

The oil biz is unlike any other, because most of the key players are GOVERNMENTS, and governments have never been noted for their business acumen.

Sure governments want to make money on their oil, but the ordinary rules that allow us to predict what other industries will do just don't apply well to oil, because politicians have too many other things to consider, in addition to the bottom line.

Consider this. Suppose you are the head of government, with enormous power, dictatorial power, so that you can do more or less as you please. You must have money coming in at all times, and once you're selling oil , you're HOOKED on the money.

So you own your country, as a practical matter, and you therefore own your own ( national ) oil company. Oil's cheap. You expect it to STAY cheap for years. But maybe you know a buyer that will pay you a hell of a lot of money for your oil company, fifty times, a hundred times, maybe , the net cash flow you're getting after paying the oil company's expenses. Now if you were an ordinary businessman, such as the ones with an MBA from any of the Ivies, you would sell in a flash, and take that cash and put it into another business.

But since you're a little tin pot dictator, or even time dictator, like the king of Saudi Arabia, you won't give selling even a passing THOUGHT. ( Remember it always takes at least an exception or two to prove a rule, lol, and in the case of the Saudi's selling a little .. it's a pig in a poke, and they're going to maintain total control, and they're just MAYBE pricing it at a very large premium, lol) .

You CAN'T sell, it just doesn't work that way, because you have to control the oil industry in order to control your country. Politicians who expect to stay in power more or less forever very rarely sell national assets that generate cash. The money they could skim off isn't worth as much to them as the power that comes with control. Sure they sell a money losing operation such as a water works sometimes, because that HELPS them stay in power.

But even though they are constrained from selling the assets, they are virtually always compelled to sell produced oil, and the lower the price, the MORE they need to sell, ouch! And the bigger the bind they're in for cash, the less likely it is that they will be making the long term investments necessary to bring new production online , or even spending the cash to preserve current production by properly managing the oil fields.

The amount of money actually spent by the big independent super national oil companies on new production is trivial, compared to the amounts spent by national oil companies, and they aren't spending much, not even a piddly hundred million here and there, if they can avoid doing so.

I kept my old Daddy's orchard up and running right thru some very tough times, losing money a lot of years, making almost nothing some other years, because it was his LIFE, his passion. And I had every reason to believe that good times would return, because almost everybody backed way off on planting new trees, and lots of growers simply quit altogether.

But I didn't plant new trees, because I was getting old myself. My neighbors who did are doing VERY well the last few years, as farming goes, because prices are very good in relation to costs, and will stay that way until the industry as a whole manages to over do production again. Both oil and apples involve long lead times, lol. If oil production capacity falls short of demand, the price will go up, substantially, and stay up a long time, as long as the economy holds up, and as long as there aren't viable substitutes. Batteries are nice, but it's going to take a LONG time for batteries to displace more even five percent of oil consumption.

I'm as far from an expert as east is from west, but according to everything I read, investment in the oil industry is at very low levels, world wide, and oil wells are like apple trees Ya gotta have new ones, cause the old ones quit on ya.

I'm dead sure oil will go up unless the world wide economy goes to hell. But .. I've been dead wrong before. ;-)

Chain Oil says: 12/23/2017 at 10:46 am
Thank you soooo much for that brilliant essay, written clearly and understandably for us laymen.

[Jan 03, 2018] Quick rump up of oil production is impossible. There will no the second shale revolution in the current range of oil prices, or may be ever

Jan 03, 2018 | peakoilbarrel.com

says: 12/27/2017 at 8:37 pm

So, is there a big wall of US shale oil coming from Texas that will dash my "happy times" of $55-65 WTI?

So thankful to get up to this level after 36 months of headaches about the oil price. Seems the only thing that could screw it up is US shale, which apparently is set to explode in 2018.

I saw someone touting Halcon stock today on SA. Making a big deal about having little debt. Too bad they flushed about $3 billion of debt when they went BK. I'm sure Mr Wilson (CEO) is, "still getting his" so to speak.

My brother is griping about why he hasn't been able to draw a salary for the last three years, heck all the shalie management has! Have to remind him we aren't in the shale fantasy land. He knows, he's just blowing like I'm prone to do.

If I don't post anymore this year, happy New Year everyone!! Things are looking up, just hope the shale industry doesn't torch it again!

Heinrich Leopold x Ignored says: 12/30/2017 at 8:12 am
Shallow sand,

IN my view you will be sleeping well in the next year. Shale increases mostly the supply of condensate and light distillates, which does little to cover the worldwide shortage of middle distillates. So, the price of 'real' oil will very likely increase over the next future whereas the prices of light distillates (propane, butane, pentane , LPG, NGPL composite .. ) are very likely depressed. Light distillates can substitute middle distillates to some degree, yet the potential is limited. So, in that sense I wish you a happy and successful New Year.

Energy News x Ignored says: 12/28/2017 at 4:36 am
INEOS Forties Pipeline System Media Update – 28/12/2017
All restrictions on the flow of oil and gas from platforms feeding into the pipeline system have been fully lifted. All customers and control rooms have now been informed.
https://www.ineos.com/businesses/ineos-fps/news/ineos-forties-pipeline-system-media-update/
https://uk.reuters.com/article/forties-oil/update-1-ineos-sees-forties-oil-flows-back-to-normal-around-new-year-idUKL8N1OS0VU
Stephen Hren x Ignored says: 12/28/2017 at 12:59 pm
https://mobile.nytimes.com/2017/12/27/world/americas/venezuela-oil-pdvsa.html?action=click&module=Top%20Stories&pgtype=Homepage

Oil production in Venezuela appears to be in free fall.

Mushalik x Ignored says: 12/28/2017 at 4:37 am
Shale gas revolution did not last long for BHP – the Fayetteville story
http://crudeoilpeak.info/shale-gas-revolution-did-not-last-long-for-bhp-the-fayetteville-story
Heinrich Leopold x Ignored says: 12/30/2017 at 6:37 am
There is no question, Shale is a disaster for investors. Nevertheless, it is a blessing for Wall Street as high oil and gas production ensures dollar stability and a growing bond bubble. The only question is when will investors will wake up. As it is perfectly OK for small companies to sacrifice themselves and burn the cash of investors through, big companies are less willing to do so. Who is next? XOM, Statoil , APA ?
Energy News x Ignored says: 12/28/2017 at 7:31 am
The ratio of commodities / S&P500 is at a record low, S&P_GSCI / S&P_500
The S&P GSCI currently comprises 24 commodities from all commodity sectors – energy products, industrial metals, agricultural products, livestock products and precious metals.
Bloomberg chart on Twitter: https://pbs.twimg.com/media/DSCfWj6W4AA7xyW.jpg
Dennis Coyne x Ignored says: 12/28/2017 at 7:33 am
https://www.bloomberg.com/news/articles/2017-12-27/all-that-new-shale-oil-may-not-be-enough-as-big-discoveries-drop

Discoveries of new reserves this year were the fewest on record and replaced just 11 percent of what was produced, according to a Dec. 21 report by consultant Rystad Energy. While shale wells are creating a glut now, without more investment in bigger, conventional supply, the world may see output deficits as soon as 2019, according to Canadian producer Suncor Energy Inc.

George Kaplan x Ignored says: 12/28/2017 at 9:39 am
Are we not now near enough to 2019 to say that there just isn't time to bring major new conventional projects on-line before mid to late 2019? The only offshore projects that could be approved and developed earlier than that would be single well tie backs using the wildcat/appraisal well as a producer, probably no more than 5 to 10 kbpd and in immediate (and likely rapid) decline, and would be dependent on there being spare processing capacity on a nearby hub (i.e. production the new production would be mitigating decline not adding output).
George Kaplan x Ignored says: 12/29/2017 at 5:00 am
But the issue isn't lack of discoveries this year, as the headline implies, it's the lack of recent FIDs which might be in part because of the drop off in discoveries in 2012 to 2015 (for all oil, but particularly easily developed oil), coupled with high debt loads, and prices that aren't high enough (or at least not yet for long enough) to allow development of what resources there are available to the IOCs. As prices rise and IOCs become more confident and are able to pay dividends as well as fund longer term developments then the really low discoveries in 2015 to 2017 might give them far fewer options than people expect (noteworthy is that any discoveries in that period that have been attractive, like Liza, have been immediately fast-tracked, so there really isn't much of a backlog of attractive projects at all).
Dennis Coyne x Ignored says: 12/30/2017 at 7:37 am
Hi George,

Headlines are almost always not quite right.

I was basing my comment on what the article said. Many of the companies are aware that discoveries have been low and not many projects will be coming online soon.

George Kaplan x Ignored says: 12/28/2017 at 9:50 am
Mexico may be heading for a period of accelerated decline (above 10%). Their two onshore regions and the southern marine region are falling at 15 to 20%, and the largest producing region (Northern Marine, which includes KMZ and Cantarell) looks like it may be starting to accelerate. The non KMZ nd Cantarell fields had been the only ones increasing, but look to now be in decline or at least on plateau, and by PEMEX forecast KMZ should be off plateau in the next couple of months or so. Mexico has now stopped exporting light oil (which mostly comes from the three smaller regions, with KMZ and Cantarell producing heavy and medium heavy) and will presumably be looking for increasing imports of it, which is probably good for the Texas LTO producers. Operating rigs have recently been declining fast.

(Apologies if this has already been posted)

George Kaplan x Ignored says: 12/28/2017 at 9:53 am
ps – for numbers: last month C&C was down 35 kbpd, and overall 210 kbpd y-o-y (almost exactly 10%).
Lightsout x Ignored says: 12/28/2017 at 10:11 am
Hi George

Do you have any information on how the ramp up of production is going for the Western isles project following first oil on 15th November.
On a side it looks like the Weald basin myth is starting to unravel.

George Kaplan x Ignored says: 12/28/2017 at 11:27 am
Not yet -first numbers for December start-up should be in March, it's a question of limiting their losses at current prices I think. All the wells were predrilled so ramp up should be fast but I wouldn't be surprised if they get pretty low reliability in the first 6 to 12 months given all the construction problems they had. Also interesting that Catcher started up on time, against most expectations. Wonder if Clair Ridge will make it this year – do you know if there are big tax benefits from depreciation for starting within a given calendar year in the UK (or might be financial yar end is more important)?
George Kaplan x Ignored says: 12/29/2017 at 10:19 am
This shows how fast the SW marine region fields are now falling (a lot of small fields were added 2007 to 2015 and are now in steep decline).

There seems no reason this and the two land regions shouldn't continue to fall at current rates (they may even accelerate given how the rig count has dropped), and if KMZ follows the predicted PEMEX curve Mexico could drop around 350 kbpd this year, possibly the same in 2019 in decline (but with 60 kbpd additions due from Abkatun), but maybe approaching as low as 1000 kbpd by mid 2020, which is probably the earliest ENI will be able to get their shallow water field on line if they fast track it.

Greenbub x Ignored says: 12/30/2017 at 1:26 am
thanks, George
Energy News x Ignored says: 12/28/2017 at 1:04 pm
Dallas Fed Energy Survey – December 28, 2017 – At what West Texas Intermediate (WTI) crude oil price would you expect the U.S. oil rig count to substantially increase?
Above $60, chart on Twitter: https://pbs.twimg.com/media/DSJdl-zX0AAUwD4.jpg
https://www.dallasfed.org/research/surveys/des/2017/1704.aspx#tab-questions
Frugal x Ignored says: 12/28/2017 at 11:11 pm
$16B Mackenzie pipeline project cancelled

CALGARY -- Imperial Oil says its much-delayed $16.1-billion project to build a natural gas pipeline across the Northwest Territories from the coast of the Beaufort Sea to northern Alberta has finally been cancelled.

George Kaplan x Ignored says: 12/29/2017 at 6:50 am
IRAQ FORMS PANEL TO OPERATE MAJNOON FIELD

Originally the plan was to increase Majnoon to over 1 mmbpd. That has now been downgraded to 400 kbpd (from current 220). Shell and Petronas have pulled out and a "government panel" will oversee the development. I'd bet on continued decline rather than any increase, and potential for significant reservoir damage along the way.

Similarly for Nasirya oil field – intend is to increase from 90 kbpd to 200, using a local oil company that also sounds like it has a lot of government input.

To me none of this ever declining brownfield development with IOCs pulling out, and promises of more exploration "coming" is compatible with the claims for their discovered resources (developed or not), or any chance of a quick ramp up if oil prices start to inflate rapidly after 2018.

http://www.ogj.com/articles/2017/12/iraq-forms-panel-to-operate-majnoon-field.html

Heinrich Leopold x Ignored says: 12/29/2017 at 9:28 am
So far, the experiences about freeze off Shale wells are limited. Will glycol also work for Shale wells when there is much water involved? I think nobody knows yet how big the impact of the cold will be on Shale wells. However, it looks like shorts are getting hyper-nervous.
Ian H x Ignored says: 12/29/2017 at 7:25 am
Oil and Gas Producers Find Frac Hits in Shale Wells a Major Challenge
In North America's most active shale fields, the drilling and hydraulic fracturing of new wells is directly placing older adjacent wells at risk of suffering a premature decline in oil and gas production.

The underlying issue has been coined as a "frac hit." And though they have long been a known side effect of hydraulic fracturing, frac hits have never mattered or occurred as much as they have recently, according to several shale experts who say the main culprit is infill drilling.

"It is a very common occurrence -- almost to the point where it is a routinely expected part of the operations," said Bob Barree, an industry consultant and president of Colorado-based petroleum engineering firm Barree & Associates.

He added that frac hits are also an expensive problem that involve costly downtime to prepare for, remediation efforts after the fact, and lost productivity in the older wells on a pad site.

A frac hit is typically described as an interwell communication event where an offset well, often termed a parent well in this setting, is affected by the pumping of a hydraulic fracturing treatment in a new well, called the child well. As the name suggests, frac hits can be a violent affair as they are known to be strong enough to damage production tubing, casing, and even wellheads
https://www.spe.org/en/jpt/jpt-article-detail/?art=2819

FWIW The first SPE paper referenced discusses mediating the negative nature of frac hits. It discusses the refrakking of a six well pad drilled in 2010 in the middle Bakken and three forks, North Fork Field, McKenzie. The six wells have a cumulative oil production to date of 3.6mmboe and 7.7bcf.
Since I am not in the field, much of the paper went over my head, I merely skimmed through it, however it appears that well communication was observed for horizontal and vertical spacing of 1000 feet.

[Jan 02, 2018] Wahabism is necessary for KSA rulers to keep the local population under control. Particularly the minority Shia population who live along the eastern coast, an area, which incidentally also has the all the oil reserves.

Notable quotes:
"... I fully agree that attacking Iran would be yet another disaster but I don't understand why Saudi Arabia is portrayed as an 'enemy', the 'real' one, no less, in alt-media circles like this. I mean let's be honest with ourselves. KSA is the definition of a vassal state. Has been so since the state established established relations with the USA in the 1940s and the status was confirmed during the 1960s under King Faisal. Oil for security. Why pretend that they have any operational clearance from the US? ..."
Jan 02, 2018 | www.unz.com

Chad , July 11, 2017 at 8:28 am GMT

I fully agree that attacking Iran would be yet another disaster but I don't understand why Saudi Arabia is portrayed as an 'enemy', the 'real' one, no less, in alt-media circles like this. I mean let's be honest with ourselves. KSA is the definition of a vassal state. Has been so since the state established established relations with the USA in the 1940s and the status was confirmed during the 1960s under King Faisal. Oil for security. Why pretend that they have any operational clearance from the US?

Contrary to the popular view, Wahabism is necessary to keep the local population under control. Particularly the minority Shia population who live along the eastern coast, an area, which incidentally also has the all the oil reserves.

USA fully understands this. Which is why they not only tolerated Wahabism, but strongly promoted it during Afghan jihad. The operation was by and large very successful btw.

It was only during the '90s when religion became the new ideology for the resistance against the empire across the Muslim world. Zero surprise there because the preceding ideology, radical left wing politics was completely defeated. Iran became the first country in this pattern. The Iranian left was decimated by the Shah, another vassal. So the religious right became the new resistance.

And as far as the KSA is considered, Wahabi preachers aren't allowed to attack the USA anyway. If any individual preacher so much as makes a squeak, he will be bent over a barrel. There won't be any "coming down very hard on Saudi Arabia" because USA already owns that country.

So what's the answer? Well, props to Phillip as he understood – "it would also require some serious thinking in the White House about the extent to which America's armed interventions all over Asia and Africa have made many people hate us enough to strap on a suicide vest and have a go."

Bingo.

Replies:

@Jake

Your analysis starts too late. The US supports Wahhabism and the House of Saud because the pro-Arabic/Islamic English Elites of 1910 and 1920 and 1935 supported Wahhabism and the House of Saud.

The British Empire 'made' the House of Saud,

Thinking it wise to use Wahhabism to control Shia Islam is like thinking it wise to use blacks to control the criminal tendencies of Mexicans.

[Dec 25, 2017] The Petro-Yuan Bombshell and Its Relation to the New US Security Doctrine

Notable quotes:
"... The new 55-page "America First" National Security Strategy (NSS), drafted over the course of 2017, defines Russia and China as "revisionist" powers, "rivals," and for all practical purposes strategic competitors of the United States. ..."
"... The NSS stops short of defining Russia and China as enemies, allowing for an "attempt to build a great partnership with those and other countries." Still, Beijing qualified it as "reckless" and "irrational." The Kremlin noted its "imperialist character" and "disregard for a multipolar world." Iran, predictably, is described by the NSS as "the world's most significant state sponsor of terrorism." ..."
Dec 25, 2017 | russia-insider.com

"Russia and China ... have concluded that pumping the US military budget by buying US bonds ... is an unsustainable proposition ..." Pepe Escobar 12,072 198

The new 55-page "America First" National Security Strategy (NSS), drafted over the course of 2017, defines Russia and China as "revisionist" powers, "rivals," and for all practical purposes strategic competitors of the United States.

The NSS stops short of defining Russia and China as enemies, allowing for an "attempt to build a great partnership with those and other countries." Still, Beijing qualified it as "reckless" and "irrational." The Kremlin noted its "imperialist character" and "disregard for a multipolar world." Iran, predictably, is described by the NSS as "the world's most significant state sponsor of terrorism."

Russia, China and Iran happen to be the three key movers and shakers in the ongoing geopolitical and geo-economic process of Eurasia integration.

The NSS can certainly be regarded as a response to what happened at the BRICS summit in Xiamen last September. Then, Russian President Vladimir Putin insisted on "the BRIC countries' concerns over the unfairness of the global financial and economic architecture which does not give due regard to the growing weight of the emerging economies," and stressed the need to "overcome the excessive domination of a limited number of reserve currencies."

That was a clear reference to the US dollar, which accounts for nearly two-thirds of total reserve currency around the world and remains the benchmark determining the price of energy and strategic raw materials.

And that brings us to the unnamed secret at the heart of the NSS; the Russia-China "threat" to the US dollar.

The CIPS/SWIFT face-off

The website of the China Foreign Exchange Trade System (CFETS) recently announced the establishment of a yuan-ruble payment system, hinting that similar systems regarding other currencies participating in the New Silk Roads, a.k.a. Belt and Road Initiative (BRI) will also be in place in the near future.

Crucially, this is not about reducing currency risk; after all Russia and China have increasingly traded bilaterally in their own currencies since the 2014 US-imposed sanctions on Russia. This is about the implementation of a huge, new alternative reserve currency zone, bypassing the US dollar.

The decision follows the establishment by Beijing, in October 2015, of the China International Payments System (CIPS). CIPS has a cooperation agreement with the private, Belgium-based SWIFT international bank clearing system, through which virtually every global transaction must transit.

What matters, in this case, is that Beijing – as well as Moscow – clearly read the writing on the wall when, in 2012, Washington applied pressure on SWIFT; blocked international clearing for every Iranian bank; and froze $100 billion in Iranian assets overseas as well as Tehran's potential to export oil. In the event that Washington might decide to slap sanctions on China, bank clearing though CIPS works as a de facto sanctions-evading mechanism.

Last March, Russia's central bank opened its first office in Beijing. Moscow is launching its first $1 billion yuan-denominated government bond sale. Moscow has made it very clear it is committed to a long-term strategy to stop using the US dollar as their primary currency in global trade, moving alongside Beijing towards what could be dubbed a post-Bretton Woods exchange system.

Gold is essential in this strategy. Russia, China, India, Brazil & South Africa are all either large producers or consumers of gold – or both. Following what has been extensively discussed in their summits since the early 2010s, the BRICS countries are bound to focus on trading physical gold .

Markets such as COMEX actually trade derivatives on gold, and are backed by an insignificant amount of physical gold. Major BRICS gold producers – especially the Russia-China partnership – plan to be able to exercise extra influence in setting up global gold prices.

The ultimate politically charged dossier

Intractable questions referring to the US dollar as the top reserve currency have been discussed at the highest levels of JP Morgan for at least five years now. There cannot be a more politically charged dossier. The NSS duly sidestepped it.

The current state of play is still all about the petrodollar system; since last year, what used to be a key, "secret" informal deal between the US and the House of Saud, is firmly in the public domain .

Even warriors in the Hindu Kush may now be aware of how oil and virtually all commodities must be traded in US dollars, and how these petrodollars are recycled into US Treasuries. Through this mechanism, Washington has accumulated an astonishing $20 trillion in debt – and counting.

Vast populations all across MENA (Middle East-Northern Africa) also learned what happened when Iraq's Saddam Hussein decided to sell oil in euros, or when Muammar Gaddafi planned to issue a pan-African gold dinar.

But now it's China who's entering the fray, following through on plans set up way back in 2012. And the name of the game is oil-futures trading priced in yuan, with the yuan fully convertible into gold on the Shanghai and Hong Kong foreign exchange markets.

The Shanghai Futures Exchange and its subsidiary, the Shanghai International Energy Exchange (INE) have already run four production environment tests for crude oil futures. Operations were supposed to start at the end of 2017, but even if they start sometime in early 2018, the fundamentals are clear: this triple win (oil/yuan/gold) completely bypasses the US dollar. The era of the petro-yuan is at hand.

Of course, there are questions on how Beijing will technically manage to set up a rival mark to Brent and WTI, or whether China's capital controls will influence it. Beijing has been quite discreet on the triple win; the petro-yuan was not even mentioned in National Development and Reform Commission documents following the 19th CCP Congress last October.

What's certain is that the BRICS countries supported the petro-yuan move at their summit in Xiamen, as diplomats confirmed to Asia Times . Venezuela is also on board. It's crucial to remember that Russia is number two and Venezuela is number seven among the world's Top Ten oil producers. Considering the pull of China's economy, they may soon be joined by other producers.

Yao Wei, chief China economist at Societe Generale in Paris, goes straight to the point, remarking how "this contract has the potential to greatly help China's push for yuan internationalization."

The hidden riches of "belt" and "road"

An extensive report by DBS in Singapore hits most of the right notes linking the internationalization of the yuan with the expansion of BRI.

In 2018, six major BRI projects will be on overdrive; the Jakarta-Bandung high-speed railway, the China-Laos railway, the Addis Ababa-Djibouti railway, the Hungary-Serbia railway, the Melaka Gateway project in Malaysia, and the upgrading of Gwadar port in Pakistan.

HSBC estimates that BRI as a whole will generate no less than an additional, game-changing $2.5 trillion worth of new trade a year.

It's important to keep in mind that the "belt" in BRI should be seen as a series of corridors connecting Eastern China with oil/gas-rich regions in Central Asia and the Middle East, while the "roads" soon to be plied by high-speed rail traverse regions filled with – what else - un-mined gold.

A key determinant of the future of the petro-yuan is what the House of Saud will do about it. Should Crown Prince – and inevitable future king – MBS opt to follow Russia's lead, to dub it as a paradigm shift would be the understatement of the century.

Yuan-denominated gold contracts will be traded not only in Shanghai and Hong Kong but also in Dubai. Saudi Arabia is also considering to issue so-called Panda bonds, after the Emirate of Sharjah is set to take the lead in the Middle East for Chinese interbank bonds.

Of course, the prelude to D-Day will be when the House of Saud officially announces it accepts yuan for at least part of its exports to China.

A follower of the Austrian school of economics correctly asserts that for oil-producing nations, higher oil price in US dollars is not as important as market share: "They are increasingly able to choose in which currencies they want to trade."

What's clear is that the House of Saud simply cannot alienate China as one of its top customers; it's Beijing who will dictate future terms. That may include extra pressure for Chinese participation in Aramco's IPO. In parallel, Washington would see Riyadh embracing the petro-yuan as the ultimate red line.

An independent European report points to what may be the Chinese trump card: "an authorization to issue treasury bills in yuan by Saudi Arabia," the creation of a Saudi investment fund, and the acquisition of a 5% share of Aramco.

Nations under US sanctions, such as Russia, Iran and Venezuela, will be among the first to embrace the petro-yuan. Smaller producers such as Angola and Nigeria are already selling oil/gas to China in yuan.

And if you don't export oil but are part of BRI, such as Pakistan, the least you can do is replace the US dollar in bilateral trade, as Interior Minister Ahsan Iqbal is currently evaluating.

A key feature of the geoeconomic heart of the world moving from the West towards Asia is that by the start of the next decade the petro-yuan and trade bypassing the US dollar will be certified facts on the ground across Eurasia.

The NSS for its part promises to preserve "peace through strength." As Washington currently deploys no less than 291,000 troops in 183 countries and has sent Special Ops to no less than 149 nations in 2017 alone, it's hard to argue the US is at "peace" – especially when the NSS seeks to channel even more resources to the industrial-military complex.

"Revisionist" Russia and China have committed an unpardonable sin; they have concluded that pumping the US military budget by buying US bonds that allow the US Treasury to finance a multi-trillion dollar deficit without raising interest rates is an unsustainable proposition for the Global South. Their "threat" – under the framework of BRICS as well as the SCO, which includes prospective members Iran and Turkey – is to increasingly settle bilateral and multilateral trade bypassing the US dollar.

It ain't over till the fat (golden) lady sings. When the beginning of the end of the petrodollar system – established by Kissinger in tandem with the House of Saud way back in 1974 – becomes a fact on the ground, all eyes will be focused on the NSS counterpunch.

John C Carleton , December 23, 2017 10:11 AM

China and Russia been dumping US bonds for a good while.
They just have to do it slowly, so they can get as much cash, to buy stolen discounted gold with from the British Anglo Zionist Empire, as possible without tanking the market.

The Federal reserve, prints currency, "loans" it to USA corporation, at USURY rates, gives this currency to other "sovereign" puppet states such as Belgium, who then act like they are buying the bonds for themselves.

It is a scam. Those who trust the USA/British Empire, will wind up with worthless paper, while the Usury bankers, their bosses, China and Russia, will wind up with gold.
All you USA worshipers should understand something.
He who has the gold, makes the rules.
Guess the western sheep are going to be the bitc#s of China and Russia for the next century or so.

Tommy Jensen John C Carleton , December 23, 2017 11:26 AM

I believe America will win. Therefore I sold my gold and bought dollares. The bad guys always win.............LOL.

Cliff Aleksandar Tomić , December 23, 2017 6:20 PM

" Treason doth never prosper
What be the reason?
For when it prosper,
None dare call it treason" -William Shakespere

Mychal Arnold Tommy Jensen , December 24, 2017 4:49 AM

Hey Tim or whatever. Yep you always win huh? Vietnam, Afghanistan, Libya, Syria, Sudan, .ring any bells I could go on but you have been embarrassed enough with your msm drivel. Always the weak and defenseless you lily livered chicken's. You better avoid war with the two most powerful countries in the world. Can you guess? and neither are you pedos and babykillers. You make me sick and disgusted. Voted again the most threat to world peace. Ussa, ussa, ussa. Proud are ya all. The time is coming where you reap what you have sown and on that day I shall dance my happy dance that you feel what you and your evil countrymen have wrought in the world in the name of democracy and freedom hope it is on cable! You rotten to the core people!

Richard Burton Mychal Arnold , December 24, 2017 11:11 AM

Here here, the US Holocaust, countless millions killed all over the globe as the USA plunders, wars and props-up evil, despot regimes. Bin Laden, Taleban, just two of the US former best allies, how long can a 200 year old, degenerate country like the USA keep sponging-off/ using exploiting the worlds billions to enrich itself? USA... infested with drugs, crime, rust belts, slums, homeless, street bums VAST inequality.

zorbatheturk Richard Burton , December 25, 2017 2:11 AM

It's still a million miles better than a craphole like RuSSia!

Mychal Arnold Richard Burton , December 24, 2017 12:01 PM

Yep! As Rome burns and eaten from within!

Le Ruse Tommy Jensen , December 25, 2017 2:32 AM

Yes Tommy.. Good move !!
Buy US$ !! US$ is backed by US government !! Gold is not backed by anything !!

Peter Jennings John C Carleton , December 23, 2017 11:09 AM

Remember the Belgium Bulge a few years back? the process must also work in reverse.

wilmers13 John C Carleton , December 24, 2017 12:43 AM

You cannot buy gold from the Empire, have you not read the book Gold Warriors.

Security is a propaganda term now, stands for war preparations.

John C Carleton wilmers13 , December 24, 2017 8:39 AM

The Empire sells other peoples gold to China and Russia everyday, having stole and sold Americans gold long since.
Works like this.
The not Federal, and no Reserve(s) dollar, is worth about 1 cent, of a 1913, pre Usury criminal banker scam "dollar".
That 1 % is swiftly loosing it's value.
To keep the American people, from realizing, the USA, is using them for cattle, stealing their labor, through planned hyperinflation,:
Israhell/Washington crime cabal, dumps massive amounts of "paper gold and silver", on the market, each and every damn day the rigged market is open, in order to artificially keep the price of gold and silver way the hell below where it should be priced in federal reserve currency.
This hide s the true inflation rate of the not federal and no reserves private Usury Banker Currency, falsely identified as the "US Dollar".
Israhell/Washington DC, does not have the physical gold and silver to cover what they sell.
It is a criminal scam.
Those who buy this paper gold and silver, small guy, will never be given physical for the paper.
Small guy, traded green paper for white paper. Either will be worthless soon.
Sovereigns, can buy enough of it, to demand delivery of physical.
The day the British Anglo zionist Empire defaults delivering physical gold, to China and Russia, for the paper gold, is the day the curtain comes down on the illusion of the USA financial empire.
Washington DC knows this, China knows this, Russia knows this.
In order to buy time, Israhell/Washington DC, has stolen, sold at hugely discounted prices, to keep the dollar scam alive, just a while longer, all the gold they were supposably storing for safe keeping, of other sovereigns.
They have stolen privately held gold, which was stored in commercial banks and vaults for "safe keeping.
They stole the gold which went missing from the basement vaults in the world trade centers, before they set off the demolition charges.
Then they sold it.
They stole and sold Ukraines gold.
They stole and sold, Libya's gold.
They had intended to have already stole and sold Syria's gold.
They are fast running out of other peoples gold, to deliver to China and Russia at huge discounts, to prop up the scam, just a while longer.
The day there is no more stolen gold to deliver to China and Russia, the music stops, all the chairs are removed, this game of musical chars is over. Starving Americans will eat their pets, rats, and each other.
Thanks Israhell!
Thanks Washington DC/USA.

Trauma2000 John C Carleton , December 24, 2017 1:11 PM

I want more information on this. Isabella said a similar thing. I want to know more... So the U$T's that are in actual fact worthless, Russia is using to buy gold at a huge discount to what should be the true market rate; and then Russia is storing this. I understand the storing thing. I'm a straight forward kind-of-a-guy. But its the U.$.T.'s to Physical Gold I can't get my head around.

Why is the U.$. honouring what is a knife-to-its-throat deal that is very soon going to result in the collapse of the U.$. dollar? And according to this forum fully 20% of Russia's reserves are still held in fiat U.$.T's..?

Why would Russia hold such a large percentage if its reserves in what will be worthless U.$.T.'s when it knows that the U.$. is going to try and scam Russia and default..?

I want to know more.

John C Carleton Trauma2000 , December 24, 2017 2:02 PM

Picture a crime family.
Some branches are pure evil.
Some not so evil.
Some are very open about their evil.
Some are sneaky hypocrites who use the news media to white wash their crimes, and vilify their victims.

BUT! And this is one huge BUT, they all know too much on each other to start talking too damn much.
Also, their criminal Empire, (shearing/raping/murdering the sheep for fun and profit) is all tied together. Common banks, common/interchangeable fiat currencies, Usury debt practices.
Take part of it down, the other part will suffer great losses, if not go down with them.
Russia, and China, has gotten tired of the British Anglo zionist Empire lording it over them and treating them like red headed step children.
Russia and China, have not seen the Light, are not operating for the sake of their people, but to keep themselves in power, by returning to the people, some of the wealth they stole from the people to begin with
British Anglo zionist pig fkers Empire, is too greedy to return any of the stolen loot.
The BAzE, have a let them eat grass like the animals they are elitist attitude.
China and Russia, are trying to position themselves to come out on top when the economic reset happens.
They both were FORCED, by Empire, to both buy and hold, huge stashes of both Federal reserve fiat currency, and bonds, to do business in the rest of the world.
The USA military is the enforcement arm for the BAzE.
USA military is corrupted, demoralized, veterans fked over royally, weapons do not work as their purpose, was to steal the labor of the American working man and women, not to produce weapons which worked as advertised.
Russia and China, will continue to buy gold, buy time, to get in a better position to give Uncle Sugar's pedophilic ass both middle fingers.
It is in their interest to do so.
The owners of the British Anglo zionist Empire, have their personal vaults filled with stolen gold.
The politicians you see, the Rothschild's even, are window dressing to hide the true owners, and to protect the true owners asses during slave revolts, by offering, kings, queens, politicians, bankers, heads to get chopped.
These owners have no loyalty to any other person, or country in the world. They see themselves as the chess players, humanity as the pieces, the earth as their personal chess board.
They do not give a FF about America, the American people, or the hand puppet political whore of DC/USA.
The hand puppet whores, are too stupid, and corrupt anyway, to understand whats coming, or to have the power, intelligence, or balls to stop it
There are all kinds of fun and wealth created, for deviant sick bastards, in creating, and tearing down empires.
Besides, all the death and destruction gets them sexually excited
Takes years of study, experience with, and intuition, to begin to understand their evil, and the way the world really works.
Whether someone started years back, educating themselves, preparing for whats coming, will determine if they will enter the kill zone as a sheep or not.
The only protection sheep have, is the hope, the jackals will rape and murder some other sheep, not them. That is why they will not stand up or speak up.
That is why they violently attack anyone wants to leave the herd mentality, everyone else forced to be in the same sheep state as them,
They are afraid the jackal will notice them individually.
Herd numbers and hiding in the herd, are the cowards only protection

Bd-prince Pramanik Trauma2000 , December 24, 2017 8:28 PM

your answer is in your question!

Mychal Arnold John C Carleton , December 24, 2017 12:41 PM

John I firmly believe they will get what is coming to them just a matter of time nothing endures forever. But mostly not in our life time, though!

John C Carleton Mychal Arnold , December 24, 2017 12:46 PM

Any day now, any week, not very many months, can the scam go on.
In other words, Americans might want to bone up on delicious recipes for Rats, cats, and their neighbors.

Trauma2000 John C Carleton , December 23, 2017 3:15 PM

re: "China and Russia been dumping US bonds for a good while.
They just have to do it slowly, so they can get as much cash, to buy stolen discounted gold with from the British Anglo Zionist Empire, as possible without tanking the market."

I have been reading this for a while. But I've yet to see it in practice. Rosneft is still accepting U.$. dollars for oil/gas transactions, the most recent of which I believe was the gas shipment from St Petersburg to Poland..? https://tomluongo.me/2017/1...

I need to read more on this subject.

BobValdez Trauma2000 , December 23, 2017 3:48 PM

Russia acceps dollars for oil, and uses them to buy physical gold. No need to hold useless dollars, just convert them to gold.

Paw Trauma2000 , December 23, 2017 9:48 PM

What you buy by petrodollars ?
Saudi .Arabia buys arms. But SA has got millions of unemployed people , because they studied Islamic religion , wahabist fanaticism ... Further SA employs millions of workers from other countries. And owns US assets in value over 1 trillion dollars. So what else to buy , where to spend their petrodollars? Only get billions dollars arms ,that are in couple years useless...Population hate the fully corrupt royal family in numbers approximately 40 thousands princess as they have to get about 500 thousands yearly salaries...For doing nothing , only to spend it everywhere...
Populations hate US presence in SA. Very much.

Richard Burton Paw , December 24, 2017 11:18 AM

But the Great Satan~USA adore such scum as the vile Crooked Saudi royal family, the snakehead USA ignore all their anti-democracy, anti- human rights their beheading, their evil ways, they worship money the US swine, its all they see and lap-up, plus they have Russia/ China /Iran to pick on and blame not their evil Saudi- swine arms buyers. View Hide

Isabella Jones Trauma2000 , December 24, 2017 11:54 AM

At the moment, because the US is illegally holding gold prices down using uncovered shorts on paper gold, and at the same time has used sanctions to devalue the rouble, Russia is producing oil at reduced - rouble - rates, selling it on the international market for U$, [artificially inflated] and buying massive amounts of cheap gold with the huge profits she is making.
Russia is singing all the way to the bank right now. The US backed itself into a corner on this one it cannot get out from - short of waging war on Russia !!!

Mychal Arnold Isabella Jones , December 24, 2017 12:32 PM

10% of GDP goes out where is the ussa 100 as are many others in the west. All western country have huge debts funny how that is or is it?

Tony B. Isabella Jones , December 24, 2017 11:31 PM

Why should anyone who is in love with gold be upset if someone is holding the price down? It should be a wonderful time to buy.
Russia is MINING gold, its own gold.

Isabella Jones Tony B. , December 25, 2017 5:41 AM

It is a great time to buy, if you have some spare cash to store, I agree. It's just a poor time if you need to realise your gold - you wont get the price for it you should. But indeed, it's a buyers market. Yes, Russia has a fair bit of gold "reserves" just sitting in the ground.

John C Carleton Trauma2000 , December 23, 2017 3:41 PM

There is the face the beast lets you see, and the real face of the beast.
You do not think the beast is stupid enough to show it's real face to all the sheep?
Really?
The sheep who are given personal attention in private places, see the real face of the beast, because it sexually excites the beast for the chosen sheep to die bleating in terror.

Nathan Dunning John C Carleton , December 23, 2017 4:36 PM

You're a tool for the left I bet you're American Liberal.

John C Carleton Nathan Dunning , December 24, 2017 9:44 AM

You are a sheep.
i Am a wolf.
You are lucky i lost my taste for mutton.
i prefer goat and jackal. View Hide

John C Carleton Nathan Dunning , December 24, 2017 9:49 AM

View Hide

Mychal Arnold Nathan Dunning , December 24, 2017 12:45 PM

Guess you just got here you friggin troll. You know nothing you shill. Go back to the basement mom has brought you dinner and cookies n milk and let the grown men talk, now that is a good boy bye. Sorry John I have disappointed my Mom said be nice but idiots bother me. Say hi to your lovely Mom for me and God bless. Merry Christmas everyone! Got your back as always.

alexwest11 John C Carleton , December 23, 2017 11:25 AM

John C Carleton • an hour ago China and Russia been dumping US bond
-------
no they don't! Russians reserves are about 100+ bln in UST

and WHOLLY 20 % OF RUSSIAN assets in Russian banks are kept mostly $$$ and some euro

John C Carleton alexwest11 , December 23, 2017 12:18 PM

Glad you are so confident in the currency, which has lost 99% of it's buying power since 1913, when the not Federal and no Reserve(s) was forced on the American people by the Usury Banker ancestors of the owners of the 'Fed", buying USA politicians.

Where did that 99% value go?
To the I%ters. You know, the pedophile elite.
They want it all, they are coming for the other 1% of the "dollar's" value.
They are coming for Social security, government pensions, private pensions, checking accounts, any thing with any value.

Oh by the way, just cause you are ignorant of how things work, don't mean they don't work that way, just means you are ignorant.
Have a wonderful day now!
See mother, i was nice to the bad person who was trying to run interference for pedophile baby rapers.

oncefiredbrass John C Carleton , December 24, 2017 2:44 AM

Good to see someone else Awake! A good portion of the Sheep are still sleeping, they think the National Debt and Zero Interest Rates mean nothing (in the Eurozone Interest is Negative). The US Dollar is soon to be Toilet Paper! Our Military can only overthrow small countries that defy the PetroDollar system. Now with so many doing it, John Carleton is right, the National Debt and Retirements Accounts are basically equal. That is why Obutthead set the start of grabbing them by creating the MYRA, the Theory is the Sheep are to stupid to manage their own retirement accounts, so the Government would grab them and put them in a so called safe investment called "Treasury's". Unfortunately the SS Trust Fund has been raided and is broke, but they do have drawers full of Treasuries. Trump has to immediately open public lands for Mining & Drilling! A normalization of Interest Rates to 5-6% would consume Government Revenues just to pay Interest on the Debt!

John C Carleton oncefiredbrass , December 24, 2017 8:22 AM

Will work like this, they may already be doing it quietly.
Take private pensions.
They are already in trouble, having stocks, bonds, commercial real estate holdings.
All of these will become worthless, or close to it.
Anything with value, currency, decimal dollars, will be taken by the Washington thieves, and worthless US bonds which will probably never be redeemed, or redeemed for chump change, will be put in their place by Washington, as they "protect" the retirement accounts.
Old people will eat rats, each other, dog and cats, die without medical care and meds which they can not afford.
Some will eat their pistols.
Not going to be nice or orderly.

Ron John C Carleton , December 23, 2017 11:11 PM

Dude, your postings are good and has an element of humor, thanks.

alexwest11 John C Carleton , December 23, 2017 11:25 PM

pedophile baby rapers.
------
people who associate everything w/ pedophile baby rapers.
USUALLY ARE pedophile baby rapers.!!!!!

YES, $ lost about 97 %, but rest of even worse

russian ruble of 1913 - worthless
german mark -worthless
japanese yen - worthless
etc!

John C Carleton alexwest11 , December 24, 2017 8:58 AM

Open mouth in ignorance, insert foot.
Don't worry about a foot in the other end, i will do that verbally with my Texas cowboy boot.

Dispora Pedophiles increasingly Use Israel as 'haven,' activist charge.'
https://www.timesofisrael.c...

'Advocacy group: Israel is a pedophiles paridise-Haaetz-Israel News'
https://www.haaretz.com/adv...

'Nachlaot, where pedophiles roam free,--the Times of Israel
https://www.haaretz.com/adv...

'Israel Found to be Safe For Pedophiles'
http://yournewswire.com/isr...

'Jewish Pedophiles Increasingly use Israel as a haven, activist charge'
https://freespeechtwentyfir...

'Power, Pedophilia and the US Government'
http://www.whale.to/c/power...

'Frankland Coverup Sex Scandal,
(pedophile prostitution ring being run out of Reagan's White House)
http://www.johnccarleton.or...

All pedo's, should be given a fair trial, and a fair hanging. A pedophile which was given a fair trial, and a fair hanging, never again, raped a child.
Amazing how that works.

How you like them Texas cowboy boots?

Aurora alexwest11 , December 23, 2017 1:19 PM

Correct and very easy at any given moment to be converted in a GOLD.Just follow dynamic Russia and China buying GOLD on a world market and everything will be clear to you

alexwest11 Aurora , December 24, 2017 12:43 AM

dynamic Russia and China buying GOLD on a world market
-----

btw . moron

Russia/ china don't buy gold on world market. they are 2 /3 gold producers in the world

WHAT IS YOU LEVEL OF FORMAL EDUCATION ??

it seems you are uneducated moron !

AM Hants alexwest11 , December 24, 2017 7:25 AM

Russian Gold Reserves 2014-2017 View Hide

Aurora alexwest11 , December 24, 2017 1:19 PM

While all eyes are on the oil price and the ruble to dollar rate, the Central Bank of Russia has quietly been buying huge volumes of gold over the past year. In January, 2016, the latest data available, the Russian Central Bank again bought 22 tons of gold, around $800 million at current exchange rates, that, amidst US and EU financial sanctions and low oil prices. It was the eleventh month in a row they bought large gold volumes. For 2015 Russia added a record 208 tons of gold to her reserves compared with 172 tons for 2014. Russia now has 1,437 tonnes of gold in reserve, the sixth largest of any nation according to the World Gold Council in London. Only USA, Germany, Italy, France and China central banks hold a larger tonnage of gold reserves.
Notably also, the Russian central bank has been selling its holdings of US Treasury debt to buy the gold, de facto de-dollarizing, a sensible move as the dollar is waging de facto currency war against the ruble. As of December, 2015, Russia held $92 billion in US Treasury Bonds down from $132 billion in January 2014.China bought another 17 tons of gold in January and will buy a total of another 215 tons this year, approximately equal to that of Russia. From August to January 2016 China added 101 tonnes of gold to its reserves. Annual purchases of more than 200 tons by the PBOC would exceed the entire gold holdings of all but about 20 countries, according to the World Gold Council. China's central bank reserves of gold have risen 57% since 2009 acording to data the PBOC revealed in July, 2015. Market watchers believe even that amount of gold in China's central bank vaults is being politically vastly understated so as not to cause alarm bells to ring too loud in Washington and London.

Mychal Arnold alexwest11 , December 24, 2017 12:50 PM

Dude stop your only making yourself look stupid by opening your gob and proving or in this case writing. Merry Christmas or is it happy Hanukkah? Troll boy.

Le Ruse Mychal Arnold , December 25, 2017 2:37 AM

Maybe Happy "Kwanza" whatever is that ??

alexwest11 Aurora , December 23, 2017 11:29 PM

any given moment to be converted in a GOLD.J
----------
???????? converted what ?

in Russia, in gold ? you are not Russian, don't live, know nothing

----------
most Russians are stupid and uneducated in finance, savings do not exist

average Russian rather buy car , or flat than save money for something.

it is USSR mentality plagued by memory of deficits

Bd-prince Pramanik alexwest11 , December 24, 2017 8:51 PM

alexwest11 You are stupid ! a flat or house is real money you know ! They are uneducated in Rothschild finance! are you a russlanddeutsche! or jew from holy ukraine like poroschenko ?

Tony B. Bd-prince Pramanik , December 24, 2017 11:36 PM

Rothschild finance can be described in a single word: THEFT.
The world's sole economic problem.

Le Ruse Tony B. , December 25, 2017 2:39 AM

Humm...
the Lord giveth and the Lord taketh away ??

AM Hants alexwest11 , December 24, 2017 7:38 AM

You confuse me. If Russians are so stupid and uneducated in finance, then why is their President a Dr in Economics?

Why are they in control of their vast wealth of natural resources?

Why do they have virtually enough gold to back the ruble and decent currency reserves, that rise monthly?

Also, how come they have free healthcare and education, including university level, if they are so stupid and uneducated?

Why does the US require Russian engines to make it into space?

Like I said, you confuse me, as I assumed you were talking about another super-nation, that has seriously lost it's way.

PUTIN'S PHD THESIS ESSENTIAL READING FOR OFFICIALS
http://slavija.proboards.co...

Russia National Debt: $194,545,062,334
Interest per Year $12,805,556,000
Interest per Second $406
Debt per Citizen $1,330
Debt as % of GDP 19.32%
GDP $1,007,000,000,000
Population 146,300,000

Russia Foreign Exchange Reserves

View Hide
oncefiredbrass alexwest11 , December 24, 2017 2:52 AM

Russia is one of the largest Countries by land mass with a sparse population after the breakup of the Soviet Union. They run very low deficits and their National Debt is very low, they are one of the Countries that is best prepared for a major economic crash.

alexwest11 oncefiredbrass , December 24, 2017 3:19 AM

oncefiredbrass alexwest11 • 28 minutes ago Russia
is one of the largest Countries by land mass with a sparse population
after the breakup of the Soviet Union. They run very low defic
--------
but facts say quite opposite!!!!!!!!

during oil selloff of 2008*9 Russian ruble fall 50%, from 23 to 37 per$

during oil selloff of 2014*15 Russian ruble fall 250 %, from 33 to almost 90 per$

right now its about 60 per $ , still 100% devaluation from 2014
-------

i don't remember $ fall against euro or yen during 2000 or/and 2008 crises in USA

more than 20 %

oncefiredbrass alexwest11 , December 24, 2017 3:27 AM

The fall of the Ruble was an attack or sanction by the Obama Regime over Ukraine. Why not trying to look up the Debt to GDP ratio for Russia and then the US and then ask yourself what economy is actually in a better position to withstand a Depression. Russia almost has enough Gold to back all their currency. How much gold would it take to back all the Treasuries and Dollars that the US has spread all over the world?

alexwest11 JIMI JAMES , December 24, 2017 6:23 AM

because in the end only the strong will survive and russia just like china
-------
!!sure moron.

avg salary in Russia about 500 $
avg pension 200 $

that is why idiotic Russians twice in 20 century totally annihilated own country!!!!!! 1917 and 1991

-----
and for china!!!!!!! it just show how moronic you are
we will see how china is good in 100 or 200 years!!!

cause history showed china always being overrun by someone else;
mongols, Manchurians, etc

learn a history western moron!!!!!!!!

Mychal Arnold alexwest11 , December 24, 2017 12:59 PM

Hey let the grown men talk baby boy! You are spouting msm talking points you're trying to debate the choir about hymns. Your not going to make anyone here see the light because you have no truths behind or in front. Msm drivel. One simple question! Who took Berlin? In ww2 of course!

Why , December 23, 2017 9:42 AM

I hope Russia will survive UKUSA's onslaught.

Craig A. Mouldey Why , December 23, 2017 10:51 AM

Me too. The U.S. has become the evil empire. The bully on the world stage stealing everyone's lunch money. I know it will devastate us in Canada, but I would still rather see the U.S. economy crumble if it would cripple their war machine, than to see this situation go on. Ron Paul was right: Instead of war, why not pursue peaceful trade? But the U.S. controllers want everyone else under their thumb as obedient serfs. It is evil. And as Smedley Butler so bluntly put it "War is a Racket"! He said this because he was sent to war with Guatemala on behalf of the United Fruit Company, aka Chiquita Brands International. This time, they are trying to steal the lunch money from those who can defend themselves. We aren't going to sit on our couch watching this war on TV, because we will watch it out our front windows.

[Dec 16, 2017] IEA Dashes Bullish Sentiment In Oil OilPrice.com

Notable quotes:
"... Big Finance not shying away from shale ..."
Dec 16, 2017 | oilprice.com

Big Finance not shying away from shale . Hedge funds and private equity are pouring money into the shale patch despite a growing chorus of investors demanding higher returns from shale companies, according to Reuters . The pressure from investors raised questions about Wall Street's commitment to the shale industry, but Reuters says that the flow of money has continued to flood in unabated.

[Dec 16, 2017] Mohammed bin Salman's ill-advised ventures have weakened Saudi Arabia, by Patrick Cockburn - The Unz Review

Notable quotes:
"... We are the ones who have been fomenting destabilization all throughout the region some of whom would have been allies of the Saudis in some common cause. ..."
"... I think there are more effective choices concerning Yemen and Qatar. But figuring out what the choices are is not going to be easy. And harder still perhaps is implementing them. As for backfire -- we are just not in a position to judge, at the moment. Anyone hoping that another major state collapses in that region is probably miscalculating the value of instability. ..."
Dec 16, 2017 | www.unz.com

Crown Prince Mohammed bin Salman (MbS) of Saudi Arabia is the undoubted Middle East man of the year, but his great impact stems more from his failures than his successes. He is accused of being Machiavellian in clearing his way to the throne by the elimination of opponents inside and outside the royal family. But, when it comes to Saudi Arabia's position in the world, his miscalculations remind one less of the cunning manoeuvres of Machiavelli and more of the pratfalls of Inspector Clouseau.

Again and again, the impulsive and mercurial young prince has embarked on ventures abroad that achieve the exact opposite of what he intended. When his father became king in early 2015, he gave support to a rebel offensive in Syria that achieved some success but provoked full-scale Russian military intervention, which in turn led to the victory of President Bashar al-Assad. At about the same time, MbS launched Saudi armed intervention, mostly through airstrikes, in the civil war in Yemen. The action was code-named Operation Decisive Storm, but two and a half years later the war is still going on, has killed 10,000 people and brought at least seven million Yemenis close to starvation.

The Crown Prince is focusing Saudi foreign policy on aggressive opposition to Iran and its regional allies, but the effect of his policies has been to increase Iranian influence. The feud with Qatar, in which Saudi Arabia and the UAE play the leading role, led to a blockade being imposed five months ago which is still going on. The offence of the Qataris was to have given support to al-Qaeda type movements – an accusation that was true enough but could be levelled equally at Saudi Arabia – and to having links with Iran. The net result of the anti-Qatari campaign has been to drive the small but fabulously wealthy state further into the Iranian embrace.

Saudi relations with other countries used to be cautious, conservative and aimed at preserving the status quo. But today its behaviour is zany, unpredictable and often counterproductive: witness the bizarre episode in November when the Lebanese Prime Minister Saad Hariri was summoned to Riyadh, not allowed to depart and forced to resign his position. The objective of this ill-considered action on the part of Saudi Arabia was apparently to weaken Hezbollah and Iran in Lebanon, but has in practice empowered both of them.

What all these Saudi actions have in common is that they are based on a naïve presumption that "a best-case scenario" will inevitably be achieved. There is no "Plan B" and not much of a "Plan A": Saudi Arabia is simply plugging into conflicts and confrontations it has no idea how to bring to an end.

MbS and his advisers may imagine that it does not matter what Yemenis, Qataris or Lebanese think because President Donald Trump and Jared Kushner, his son-in-law and chief Middle East adviser, are firmly in their corner. "I have great confidence in King Salman and the Crown Prince of Saudi Arabia, they know exactly what they are doing," tweeted Trump in early November after the round up and confinement of some 200 members of the Saudi elite. "Some of those they are harshly treating have been 'milking' their country for years!" Earlier he had tweeted support for the attempt to isolate Qatar as a supporter of "terrorism".

But Saudi Arabia is learning that support from the White House these days brings fewer advantages than in the past. The attention span of Donald Trump is notoriously short, and his preoccupation is with domestic US politics: his approval does not necessarily mean the approval of other parts of the US government. The State Department and the Pentagon may disapprove of the latest Trump tweet and seek to ignore or circumvent it. Despite his positive tweet, the US did not back the Saudi confrontation with Qatar or the attempt to get Mr Hariri to resign as prime minister of Lebanon.

For its part, the White House is finding out the limitations of Saudi power. MbS was not able to get the Palestinian leader Mahmoud Abbas to agree to a US-sponsored peace plan that would have given Israel very much and the Palestinians very little. The idea of a Saudi-Israeli covert alliance against Iran may sound attractive to some Washington think tanks, but does not make much sense on the ground. The assumption that Trump's recognition of Jerusalem as the capital of Israel, and the promise to move the US embassy there, would have no long-term effects on attitudes in the Middle East is beginning to look shaky.

It is Saudi Arabia – and not its rivals – that is becoming isolated. The political balance of power in the region changed to its disadvantage over the last two years. Some of this predates the elevation of MbS: by 2015 it was becoming clear that a combination of Sunni states led by Saudi Arabia, Qatar and Turkey was failing to carry out regime change in Damascus. This powerful grouping has fragmented, with Turkey and Qatar moving closer to the Russian-backed Iranian-led axis, which is the dominant power in the northern tier of the Middle East between Afghanistan and the Mediterranean.

If the US and Saudi Arabia wanted to do anything about this new alignment, they have left it too late. Other states in the Middle East are coming to recognise that there are winners and losers, and have no wish to be on the losing side. When President Recep Tayyip Erdogan called a meeting this week in Istanbul of the Organisation of Islamic Cooperation, to which 57 Muslim states belong, to reject and condemn the US decision on Jerusalem, Saudi Arabia only sent a junior representative to this normally moribund organisation. But other state leaders like Iranian President Hassan Rouhani, King Abdullah of Jordan and the emirs of Kuwait and Qatar, among many others, were present. They recognised East Jerusalem as the Palestinian capital and demanded the US reverse its decision.

MbS is in the tradition of leaders all over the world who show Machiavellian skills in securing power within their own countries. But their success domestically gives them an exaggerated sense of their own capacity in dealing with foreign affairs, and this can have calamitous consequences. Saddam Hussein was very acute in seizing power in Iraq but ruined his country by starting two wars he could not win.

Mistakes made by powerful leaders are often explained by their own egomania and ignorance, supplemented by flattering but misleading advice from their senior lieutenants. The first steps in foreign intervention are often alluring because a leader can present himself as a national standard bearer, justifying his monopoly of power at home. Such a patriotic posture is a shortcut to popularity, but there is always a political bill to pay if confrontations and wars end in frustration and defeat. MbS has unwisely decided that Saudi Arabia should play a more active and aggressive role at the very moment that its real political and economic strength is ebbing. He is overplaying his hand and making too many enemies.

Svigor , December 16, 2017 at 6:24 am GMT
The only hope someone as cloistered as a Saudi crown prince can have of being an effective ruler is either by being an extraordinary person (very curious, love learning for its own sake, etc), or be at least moderately intelligent, and listen to consensus.

For its part, the White House is finding out the limitations of Saudi power. MbS was not able to get the Palestinian leader Mahmoud Abbas to agree to a US-sponsored peace plan that would have given Israel very much and the Palestinians very little.

Lies and Jew-hatred. Everyone knows that despite their infamous sharpness in business dealings, the world's longest history of legalism, a completely self-centered and ethnocentric culture, and their longstanding abuse of the Palestinians, every single deal the Jews try to sign with the Palestinians heavily favors the Palestinians, and the only reason the Palestinians won't sign is because they're psychotic Jew-haters.

The idea of a Saudi-Israeli covert alliance against Iran may sound attractive to some Washington think tanks, but does not make much sense on the ground. The assumption that Trump's recognition of Jerusalem as the capital of Israel, and the promise to move the US embassy there, would have no long-term effects on attitudes in the Middle East is beginning to look shaky.

Hey, you skipped the part where you did anything to support the idea that a Zionist-Saudi alliance doesn't make sense.

K, let's all wait for Art Deco to come in and spew some Hasbara then tell us he's not a Zhid.

Avery , December 16, 2017 at 6:28 am GMT
{Mohammed Bin Salman's Ill-Advised Ventures Have Weakened Saudi Arabia}

GREAT news. Hopefully the evil, cannibalistic terrorism spreading so-called 'kingdom' of desert nomads will continue on its path of self destruction, and disappear as a functioning state.

Tammy , December 16, 2017 at 9:51 am GMT
Once more a Saudi Firster was detained in KSA. This time the owner of Arab Bank, a Jordanian with dual Jordan and KSA citizenship. Saad Hariri a Lebanese was the first one who was dual Lebanon and KSA citizens and who lost his diplomatic immunity in KSA.

I wonder if the Israel Firster who are dual citizens are now sweating? Wonder, if Netanyahu is still an USA citizen? Happy days are coming back .

Jake , December 16, 2017 at 12:31 pm GMT
"Saudi relations with other countries used to be cautious, conservative and aimed at preserving the status quo. But today its behaviour is zany, unpredictable and often counterproductive:"

Saudis allied with Israelis, backed by the wealth and might of the US? Guaranteed to bring out the worst in Saudis (which is bad enough at base) and Israelis and Americans.

cbrown , December 16, 2017 at 1:07 pm GMT
Machiavellian skills really ? I'd see 6 months ahead if this was true. MBS just made a show that they are a de facto Mafia not a businessman to the whole world. I'd bet he just quashed a lot of efforts and money spent on raising the racing horses of the saud monarch and in turn destroyed some serious connection that were vital but aren't readily available to them. Just how potent money they thought it would be ? Sure all is businesses and it will work so long you can pay the right person. The problem is where to find the right person.
Joe Hide , December 16, 2017 at 1:53 pm GMT
Come on Cockburn, look at the Big Picture, not the little one. This the old fallacy of looking at the trees and not seeing the forest. What is happening in Saudi Arabia is a piece of the much bigger puzzle being put together over years, decades, and maybe generations.

The psychopaths at the top of the power pyramid have been engaged in this hidden global game for generations, it's always been part of their longterm strategy.

Very recently Highly intelligent, realistic, morally and ethically centered, and practically oriented individuals, have also formed secret powerful groups to arrive at beneficial goals for humanity. These truly Good Guys have learned that the criminal, murderous, lecherous, degenerate, deviate, psychopaths in positions of great power are irredeemable and should be eliminated where possible. What you see in Saudi Arabia is merely a tree, not the forest. Just the same, to the author, keep writing but research the subject much much more before you put pen to paper, as you do have apersuasive and talented style.

EliteCommInc. , December 16, 2017 at 2:25 pm GMT
I am going to come to the defence here.

1. We have been screaming about the unintended consequences of Saudi giving to charities since 2004.

2. We removed the buffer of Iraq from Iranian ambitions (as unclear as it may be debated) creating issues not only for Saudi Arabia, but others in the region as well.

3. We are the ones who have been fomenting destabilization all throughout the region some of whom would have been allies of the Saudis in some common cause.

4. No one is escaping the negative consequences of our Iraq invasion.

5. We have been complaining about rogue and irresponsible wealthy Muslims ad naseum.

Now when someone steps up the plate to meet the challenges many caused by the US – our first complaint is not astute counsel but rather a series of articles highlighting failure. I would not contend that I support every choice. But I think we should at least take a wait and see perspective. He is operating in a region rife with intrigue and ambitions, not to mention -- Muslims bent on spreading Islam as one would expect a muslim to do. Frankly I am not sure how one governs in the arena of the middle east – especially now – it's a region in major shift.

I think there are more effective choices concerning Yemen and Qatar. But figuring out what the choices are is not going to be easy. And harder still perhaps is implementing them. As for backfire -- we are just not in a position to judge, at the moment. Anyone hoping that another major state collapses in that region is probably miscalculating the value of instability.

DESERT FOX , December 16, 2017 at 2:39 pm GMT
The Saudis are the U.S. and ISISRAELS puppet, they do what the Zionist neocons tell them to do, which is to be the Zionist agent provocateur in the Mideast.

The Saudis have helped the U.S. and ISISRAEL create and finance ISIS aka AL CIADA and for this the Saudis can rot in hell, and by the way the reason for the attack on Yemen is that the Saudis oil reserves are diminishing and so the Saudis figured they would take Yemens oil.

The main creators of ISIS aka AL CIADA are the U.S. and ISISRAEL and BRITAIN ie the CIA and the MOSSAD and MI6.

Anon , Disclaimer December 16, 2017 at 4:55 pm GMT
The irony is that Saudis, before MbS and during his dominance, are making exactly the same suicidal blunders as the US. No enemy could have damaged the US and its positions in the world more than its Presidents and the Congress in the last 17 years. The same is true for KSA, with the same mistakes being made: undermining the financial system of the country, global over-reach that forces all opposition to unite, crazy military expenses, etc.
Art , December 16, 2017 at 5:57 pm GMT
Sorry, but these people dressed in 14 century robes and garb, cannot be taken seriously. They look like play-people feigning a furious grandeur. Without their petrochemicals – they would be laughed at by everyone – including their own kind. They should not be respected because they are religious – they are old world tribalist thugs hiding behind a religion. They use and abuse their people – holding them back from modernity.

Think Peace -- Art

Anon , Disclaimer December 16, 2017 at 6:17 pm GMT
@Z-man

Thing is, Saudi regime was rotten through and through before MbS, remains rotten under his rule, and will remain rotten when some other jerk kicks him out and establishes himself at the helm.

neutral , December 16, 2017 at 6:31 pm GMT
It does not matter how smart Saudi Arabia is with their foreign policy now, they became allies with Israel, that means Saudi Arabia can never claim to be a power working for the interests of Islam. MBS is a marked man, no matter how many purges he undertakes in his army, or even if he just hires Pakistani soldiers, if he has Muslims fighting in his army he will always be carrying the risk of being assassinated by somebody who has seen him cross the red line and become pro jewish.
Svigor , December 16, 2017 at 6:51 pm GMT
I don't really understand the constant hopes that the Saudi regime will fall. How is that any different from cheering Bush's disastrous regime change in Iraq? How will the fallout be any better in Arabia than it was in Iraq, Libya, etc?
cbrown , December 16, 2017 at 7:43 pm GMT
@Svigor

It's not that there's a constant hope it's just they'd fall in the near future and fortunately it will balance the geopolitical power in the future. Their fallout aren't going to be as bad unless the people pulling their string persistent in keeping them in power.

neutral , December 16, 2017 at 8:14 pm GMT
@Svigor

It will be better because it means Israel loses an ally, also with the Saudis gone Egypt will also be unable to keep their population in check. The fall of the Saudis means that Israel will be surrounded by regimes that oppose it...

someone , December 17, 2017 at 12:14 am GMT
Another Junior Gaddafi that is going to ruin his entire nation while intoxicated with NYT or other Western media coverage. He talks of corruption after spending 1.1 Billion dollars on a yacht and a painting.
Netenyahu is much the same. He has weakened Israel immensely by playing the scary wolf.
anon , Disclaimer December 17, 2017 at 12:33 am GMT
@neutral

South Africa was never in danger from their hostile neighbors . They committed suicide. Egypt cannot control its own territory let alone start wars , ditto for Syria and Lebanon. Jordan is a client state of Israel and lacks a functioning army. ...

[Dec 16, 2017] Is The Oil Glut Set To Return

Notable quotes:
"... Old "classic" land-based oil fields deteriorate to the tune of 5% per year, while deep sea deteriorate more and subprime wells much more. You can probably double the figure for each, although much depends on particular geology. Infill drilling accelerates depletion, allowing to maintain high production for sometimes so changes can be abrupt. ..."
"... Moreover, with each year, "subprime wells" (multi-stage shale well) costs more and now are at a range of n 6-10 million depending on the number and the length of horizontals and number of fracking stages and other factors. Only few area (sweet spots) can recover this capital investment during the life of the shale well at current prices). More at around $80 and almost all around $100 per barrel. The later is also the price that KSA needs to remain solvent (rumored to be in low 90th). ..."
"... The shale oil produced in the USA is really "subprime" because large part of it has lower energy content (by 20% or more) and different mix of various hydrocarbons that "classic" oil. Especially condensate from gas wells. Which optimally can be used only as diluter for heavy oil. EIA does not differentiate between different types oil and use wrong metric (volume instead of weight). May be intentionally. ..."
"... Another factor is that world consumption continue to grow and will do so because population in large part of Asia and Africa is still growing and number of cars on the road increase each year requiring on average 1-1.4 MB/d additionally. ..."
"... By continuing its' easy money policies well past any recession or growth scare, the Fed has created a monster. Most shale companies aren't profitable and are in fact losing money using any kind of GAAP. However, cheap financing allows them to survive and "drill baby drill." The unintended consequences may include destabilizing Saudi Arabia to the point of an economic and political collapse. One can always hope ..."
"... Economic collapse in Venezuela due to low oil prices – good! Economic collapse in Saudi Arabia due to low oil prices – bad! Solution – extend cheap financing to Saudi Arabia via Aramco IPO! ..."
"... The 36″ North Sea Forties pipeline is currently shut down for repairs. Short and medium term prices will carry the effect of that supply loss. In the long term, unexpected developments are common. Considering how completely wrong so many oil analysts have been over the past ten years, including the IEA, there is not a lot of credibility in oil market predictions. ..."
Dec 16, 2017 | www.nakedcapitalism.com

likbez , , December 17, 7935 at 3:13 pm

My impression is that this a gap (could be intentional) between IEA statistics and predictions and the reality. This is propaganda agency after all, with the explicit agenda of keeping the oil price for Us consumers low. So typically that produce too "rosy" forecasts that later are quietly corrected. Their short-term forecasts are based on oil futures and as such has nothing to do with the reality on the ground. Which is quite disturbing.

It is undeniable that shale boom which played such a beneficial role for the USA allowing to squeeze oil price (with generous help from KSA) for two and half years is dead.

Now is kept artificially alive by junk bonds and directs loans that will never be repaid. In other words, the USA now enjoys a period of "subprime oil. Unless there is a new technological breakthrough there will be an only minor improvement in efficiency of drilling and oil extraction in the next couple of years, but the lion share of those was already implemented, and on the current technological level we are close to the "peak efficiency" in drilling and services.

Those minor efficiencies will be negated by rising prices of service industries, which can't take the current pricing any longer and need to raise prices for their services.

Old "classic" land-based oil fields deteriorate to the tune of 5% per year, while deep sea deteriorate more and subprime wells much more. You can probably double the figure for each, although much depends on particular geology. Infill drilling accelerates depletion, allowing to maintain high production for sometimes so changes can be abrupt.

In any case each year you need somehow to find 5 MB/d of oil, finance new wells in those areas and infrastructure required. All Us shale production is around 6 MD/day. So you get the idea.

Moreover, with each year, "subprime wells" (multi-stage shale well) costs more and now are at a range of n 6-10 million depending on the number and the length of horizontals and number of fracking stages and other factors. Only few area (sweet spots) can recover this capital investment during the life of the shale well at current prices). More at around $80 and almost all around $100 per barrel. The later is also the price that KSA needs to remain solvent (rumored to be in low 90th).

The shale oil produced in the USA is really "subprime" because large part of it has lower energy content (by 20% or more) and different mix of various hydrocarbons that "classic" oil. Especially condensate from gas wells. Which optimally can be used only as diluter for heavy oil. EIA does not differentiate between different types oil and use wrong metric (volume instead of weight). May be intentionally.

So the future remains unpredictable but general trend for oil prices might be up with some spikes, not down. Although many people, including myself, thought so in early 2015 ;-)

Another factor is that world consumption continue to grow and will do so because population in large part of Asia and Africa is still growing and number of cars on the road increase each year requiring on average 1-1.4 MB/d additionally.

So it looks like the situation gradually deteriorate despite all efforts and related technological breakthrough which allow to extract more from the old wells and more efficiently extract shale oil.

The problem is that new large deposits are very hard to find now and several previously oil-exporting countries gradually became oil-importers. Mexico is one, which will be huge hit.

Obama administration screw the opportunity to move US consumers to hybrid cars so the situation in the USA deteriorates too despite rise of percentage of more economical vehicle in the personal car fleet each year. Rumors were that they pursue vendetta against Russia and that was primary consideration - to crash Russian economy and install a new "Yeltsin".

The USA generally is in better position then many other countries as the switch to natural gas and hybrid electric cars for personal transportation is still possible. It already happened in several European countries for selected types of cars, buses and trucks (taxi, in-city buses and "daily round trip or short trips trucks).

But there is no money for infrastructure anymore and for example many miles of US rail remain non-electrified. Burning diesel instead.

As maintenance was neglected for two and half year disruption of existing supply might became more frequent. also mid Eastern war is also a possibility with Trump saber-rattling against Iran. Recently the leak in undersea pipeline removed 0.5 MB/d from the market and caused a price spike to $65 for Brent (WTI remains cheaper and never crosses $60 this time).

Also with a young prince in charge and the revolution against "old guard" KSA became more and more unstable so the next "oil shock" might come from them. They also have problem of depletion which until now they compensated pitting more and more heavy high sulfur oil deposits online. At some point they will be exhausted too. They also pitch for war with Iran, but they would prefer somebody else to do heavy lifting.

The only one or countries still can significantly increase oil production now – Libya (were we have problem because of the civil war after US-sponsored Kaddafi removal and killing), and Iraq where there are still untapped areas that might contain some oil; nothing big, but still substantial in the range of 1 MB/d. Looks like Iran now exports all it could. Same is true for KSA and Russia. In this sense OPEN oil production cuts might an attempt to preserve impression that they are untapped reserved. I doubt that there are much and those cuts are just a reasonable insurance policy against quick depletion of existing wells as higher price gives some space for innovation.

There is also such thing as EBITRA which gradually deteriorates everywhere and can become negative for certain types of oil (for oil sands it depends on the price of natural gas and they are primary candidate if the price doubles or triples from the current level).

Jim Haygood , December 15, 2017 at 7:07 am

' The surplus will be front-loaded – the first half of the year will see a glut of about 200,000 bpd. '

That don't square at all with WTI futures being backwardated from Feb 2018 ($57.08) to Dec 2022 ($49.79).

http://data.tradingcharts.com/futures/quotes/cl.html

Me so bullish

ChrisFromGeorgia , December 15, 2017 at 7:46 am

By continuing its' easy money policies well past any recession or growth scare, the Fed has created a monster. Most shale companies aren't profitable and are in fact losing money using any kind of GAAP. However, cheap financing allows them to survive and "drill baby drill." The unintended consequences may include destabilizing Saudi Arabia to the point of an economic and political collapse. One can always hope

nonsense factory , December 15, 2017 at 11:19 am

Economic collapse in Venezuela due to low oil prices – good! Economic collapse in Saudi Arabia due to low oil prices – bad! Solution – extend cheap financing to Saudi Arabia via Aramco IPO!

Meanwhile, China says it will be moving to all-electric cars and trucks to help solve its horrible urban air pollution problem. . . Meaning global demand has nowhere to go but down.

Why do I feel that this will not end well for the American hegemon? Particularly with Trump in office working overtime with boy genius Rick Perry to promote coal and sabotage renewable energy. . .

Octopii , December 15, 2017 at 8:14 am

The 36″ North Sea Forties pipeline is currently shut down for repairs. Short and medium term prices will carry the effect of that supply loss. In the long term, unexpected developments are common. Considering how completely wrong so many oil analysts have been over the past ten years, including the IEA, there is not a lot of credibility in oil market predictions.

[Dec 09, 2017] The great Middle East energy game Winners and losers - Opinion

Dec 09, 2017 | www.jpost.com

Simultaneously, it has managed to develop fairly profitable, albeit at times tense relationships with other major or rising world powers. Those include Russia, China and Turkey. At the same time it is engaging a large number of European countries, South Korea, India, and others in assorted trade agreements. Iran has managed to place itself front and center – not only as a bad actor bent on colonization of the "Shi'a Crescent" and possibly beyond – it has also gained increasing political and economic legitimacy among its former adversaries.

Iran has even managed to get the United States under the Trump administration to wage limited war against ISIS, first in Iraq and Syria and to a lesser extent in Afghanistan, despite conflicts and occasional confrontations between US forces and the terrorist group's own militias. While Iran's various financial deals are to some extent being tracked, what remains noteworthy is the issue of energy control in the region, a factor that fuels the numerous conflicts, or at least finances them.

... ... ...

The US has miscalculated by believing other countries are incapable of pursuing independent interests without its involvement, or by thinking such nations cannot use energy markets effectively to marginalize any state that is not already in an active leadership position. The US should take stock of the way the energy assets are being played by various states. It should either separate the authoritarian regimes which only grow stronger with the greater access and interconnections such valuable assets provide, or by outplaying those states at their own game.

[Dec 08, 2017] Trump Is Bashing The 'Salvator Saudi' - Why

Notable quotes:
"... Trump has just declared that the U.S. recognizes Jerusalem as the capital of Israel. Did the administration expect the applause of the Saudis for its breaking of international law with regards to Jerusalem? Does it lash out to the Saudis to get their agreement? ..."
"... If so the miscalculation is clearly on the U.S. side. It is impossible for the Saudis to concede the Haram al-Sharif, the mosque on the so called temple mount, to the Zionists. The Saudi King would no longer be the "custodian of the two holy mosques" in Mecca and Medina but the "seller of the third holy mosque" of Islam in Jerusalem. The people would kill him and his whole family. ..."
"... My pet hypothesis is Trump's recognizing Jerusalem was the bone he was willing to throw the Israelis after his generals told him attacking Iran would be catastrophic for the US military and world economy. The Saudis, who are as rabid about bombing Iran as the Zionists, were pissed as they probably had been led to believe the attack was a matter of time. ..."
"... That sacked FM - Is that the little fellow that Col Lang calls "The Chihuahua"? ..."
"... Saudi in all likelihood were not part of the Jerusalem declaration. Israeli sources spread a plan they said was agreed to by Saudi, trying to embarrass them. ..."
"... Jerusalem: The reaction is deeper than expected. Not in the way of street, easily contained, violence, but by a gut reaction of the whole ME..The religious aspect seems to have been totally ignored by the US. Removing one of the major symbols of about 1.2 billion people - is not going to go down well. ..."
"... wahabbi is a tavistock british demented fiendish virus injected into islam for gang counter gang pseudogang hagel control ..."
"... I do wonder...knowing that real or false-flag violence could ensue against Israeli or US targets, it could be a useful pretext for the US waging war in the ME against Hezbullah or anyone else we accuse. With our intelligence agencies providing the "evidence" and a compliant media to sell it, as usual a majority of Americans would support it. ..."
"... This Jerusalem declaration has me genuinely scared. Violence (real or false flag) could be the expected Reaction to this Problem, resulting in the long-planned Solution of finishing off MENA. If Russia is sincere in its alliance with Syria and Iran, and interest in a multi-polar world with self-determination for sovereign nations, this war could easily escalate to the End Timer's dreamt of Final Battle of Armageddon. ..."
"... Most of the MSM coverage of Reactions I've seen name Muslim/Arab countries as opposing, and others as "concerned," even though almost all official state responses have denounced President Trump's® declaration. This "Clash of Civilizations" type narrative is not encouraging. ..."
"... something stinks in trumptoon. really small world what are the chances A. whenever Donald Trump has left the White House and ventured anywhere, Dmitry Rybolovlev (aka the "Russian King of Fertilizer") has tended to show up in the same city. The latter possibility has long been bolstered by the fact that Trump sold Rybolovlev a mansion a few years ago that neither of them lived in nor cared about, suggesting the sale was mere cover for shifting money from Russia to Trump. ..."
"... Western media called Putin unpredictable, but that was because he could see moves that others didn't see. ..."
Dec 08, 2017 | www.moonofalabama.org

Just the day before the administration leaked to the WSJ about the art deal, President Trump had publicly scolded MbS about the situation in Yemen:

President Trump called on Saudi Arabia to lift its crushing blockade against its war-torn neighbor Yemen on Wednesday, hours after defying the kingdom and saying the U.S. would recognize Jerusalem as the capital of Israel .

In a statement Wednesday afternoon, Mr. Trump said he had directed members of his administration to reach out to the Saudi leadership "to request that they completely allow food, fuel, water, and medicine to reach the Yemeni people who desperately need it."

Today Secretary of State Tillerson again pushed that line :

Speaking in Paris on Friday, Rex Tillerson, US secretary of state, called on Saudi Arabia to be "measured" in its military operations in Yemen.
...
Tillerson urged Saudi restraint.

"With respect to Saudi Arabia's engagement with Qatar, how they're handling the Yemen war that they're engaged in, the Lebanon situation, we would encourage them to be a bit more measured and a bit more thoughtful in those actions to, I think, fully consider the consequences," he said.

He once again demanded a "complete end" to the Saudi-led blockade of Yemen so that humanitarian aid and commercial supplies could be delivered.

Embarrassing MbS about the art buy and publicly(!) scolding hm for the situation in Yemen, for which the U.S. is just as much responsible as the Saudis, is quite an assault. What has MbS done - or not done - to deserve such a punishment?

Trump has just declared that the U.S. recognizes Jerusalem as the capital of Israel. Did the administration expect the applause of the Saudis for its breaking of international law with regards to Jerusalem? Does it lash out to the Saudis to get their agreement?

If so the miscalculation is clearly on the U.S. side. It is impossible for the Saudis to concede the Haram al-Sharif, the mosque on the so called temple mount, to the Zionists. The Saudi King would no longer be the "custodian of the two holy mosques" in Mecca and Medina but the "seller of the third holy mosque" of Islam in Jerusalem. The people would kill him and his whole family.

If the issue of this public hustle it is not Jerusalem, what else might it be that the Trump administration wants and the Saudis can not, or are not willing to concede?

A few hours ago the Saudi King fired his ankle biting Foreign Minster Adel al-Jubair. A relative of the king, Khaled bin Salman, will take the job. Is this related to the spat with Trump?

arbetet , Dec 8, 2017 3:02:14 PM | 1

This came up:
Breaking: Saudi FM allegedly sacked by regime

The Saudi Foreign Minister, 'Adel Al-Jubeir, has been allegedly sacked by the Kingdom's regime, several prominent political activists reported this evening.

According to the claims, Jubeir was fired and replaced by a close confidant of Crown Prince Mohammad bin Salman.

The confidant that is allegedly replacing Jubeir is none other than Prince Khaled bin Salman, the Crown Prince's brother.

The Saudi regime has yet to confirm or deny these rumors.

https://www.almasdarnews.com/article/breaking-saudi-fm-allegedly-sacked-regime/

Madderhatter67 , Dec 8, 2017 3:14:21 PM | 2
It was Jerusalem. They were not willing to sacrifice Jerusalem.
Quentin , Dec 8, 2017 3:20:29 PM | 3
Where does MbS's interpretation of Salvator Mundi come from. The Saudi's have something with crystal orbs, like the one Trump so fondly stroked in Riyadh after giving a masterful interpretation of the sword dance.
BX , Dec 8, 2017 3:20:30 PM | 4
Yes. It is puzzling what is going on between MbS and the Trump administration. I was sure MbS, the reformer, secretly okayed the Jerusalem move. His negative statement might be just theater, I figured. But I am not so sure anymore. Yes, MbS wants a peace deal (any deal with "peace" written on it) between Palestinians and Israelis. But both he and Trump/Kushner are novices in politics and diplomacy (and that ain't the same as getting a deal for a new tower) and absolutely underestimated the effort. Totally.

Word is that Kushner made Trump delay delivering his campaign promise because he needed more time for his peace plan (and that would be 6 months???). This is the level they are at. And now, they placed an obvious obstacle in the path go their peace plan - out of folly. Complete folly. Because Trump wanted to deliver. I believe they are already backtracking as good as they can. But the damage is done. I think Palestinians were just waiting for a good opportunity/reason to get rid of the US in the process and found it now. Also, the single state solution is being talked about.

The source for the WSJ need not be the Trump administration in the narrow sense but some stray intelligence official ("U.S. intelligence reports") wanting to throw a wrench because that story is absolutely damaging. Absolutely, because it is embarrassing and I don't think MbS enjoys that. Note, the story began to become known around the time it became obvious Trump would not sign the waiver and reached its epitome (WSJ) just after that. Trump set himself up for this.

Don Wiscacho , Dec 8, 2017 3:38:33 PM | 5
My pet hypothesis is Trump's recognizing Jerusalem was the bone he was willing to throw the Israelis after his generals told him attacking Iran would be catastrophic for the US military and world economy. The Saudis, who are as rabid about bombing Iran as the Zionists, were pissed as they probably had been led to believe the attack was a matter of time. In order to remind them of their position and get them on board with the "peace" deal Tillerson has been hinting about, they've been turning the screws on MBS as a taste of what's to come if he puts up stink about the wonderful Kushner- concocted "plan".
fx , Dec 8, 2017 3:42:39 PM | 6
$450 mil... MbS's Egyptian torturer-in-chief must have just torn a few princely nails and whip a few feet for that, just a few days' worth of "anti-corruption" "campaigning".

Wait, wasn't the Saudi populace all behind MbS because he was going to spend the money on them? If there is no bread, let them non-royals eat paint.

somebody , Dec 8, 2017 3:56:36 PM | 7
About the picture - after the shake down of Saudi Arabia's rich princes MBS must have a lot of enemies. Some of these princes might have been close to the Trump administration.
Bart Hansen , Dec 8, 2017 4:01:43 PM | 8
That sacked FM - Is that the little fellow that Col Lang calls "The Chihuahua"?
somebody , Dec 8, 2017 4:09:19 PM | 9
Good Patrick Cockburn article on the mess .

Gazan military groups are warming up to a rocket competition. I am sure the real stuff is not involved yet. What were they thinking? That people did not take the chance to unite on the only issue they all agree on?

4
I agree, Saudi in all likelihood were not part of the Jerusalem declaration. Israeli sources spread a plan they said was agreed to by Saudi, trying to embarrass them.

stonebird , Dec 8, 2017 4:54:47 PM | 10
MbS is in it for himself, no one else. Leave him aside for the moment.

However, Trump probably thought he had a marvellous peace plan for Palestine which he would show the world.... errr... tomorrow. This was supposed to have the backing of the Saudis and the Israelis and all the other ME "actors" would be lined up behind MbS.

ie. Saudis would provide the backing, which included the "Arab" states as per the recent gathering of them all (excluding Iran and Iraq). Abbas would be blackmailed to go along in order to keep his position (Moneywise), and the Palestinians as well - but by the withholding of funds. (New vote in Congress).

Leaks of the plan (unverified) suggest that the PA's would be held in walled-in isolated camps, with all contact subject to the harassement and nightly raids of the IDF, the land still open to theft by settlers (this has been "legalised" in Israel !) and so on. ie they get nothing except a tissue-paper "treaty" . They seem not to have even been consulted by Kushner and the Israelis. ie who possibly expected to be able to impose whatever Netanyahu and the Israeli Generals might allow.

BUT, when have either the US or Israel kept to an agreement - never. and the PA's and the rest of the ME know it.

Jerusalem: The reaction is deeper than expected. Not in the way of street, easily contained, violence, but by a gut reaction of the whole ME..The religious aspect seems to have been totally ignored by the US. Removing one of the major symbols of about 1.2 billion people - is not going to go down well.

Those countries with a large Palestinian refugee population, either fear them, or may be outnumbered if there are more arriving (Jordan), or will find that they now have a potential source of militants at their disposal.. (Syria?, Lebanon?). The Syrians and Lebanese have not let the Palestinians get more arms - yet, as they might have become targets themselves. But, there have been PA's in the Syrian counter-terrorist forces, even when Yarmouk camp was held by Daesh (or one of the others).

So I think that the "bit" players have got cold feet. They cannot go along with the eradication of the Palestinians or their confinement to concentrated internement camps such as Gaza, whose conditions are WORSE that prisons. Otherwise the whole "Rulers-People and the power-structures that keep them in place" would be in jeopardy.
......
The Leonardo ? .... acquiring "class" by buying expensive "cultural" artifacts. You can buy a lot of "class" with $450.3 million.

psychohistorian , Dec 8, 2017 5:06:51 PM | 11
I think that answer to b's question has a lot to do with trying to incite war in the ME

I think that SA does not want to be the global elite's proxy in a war with Iran....especially to start/incite the war.

It really is becoming a public spectacle and that plays into the desire of the masses to see such incompetence writ large.

I entreat everyone's spirits to keep these kooks away from the nukes.

Jef , Dec 8, 2017 5:17:11 PM | 12
Yo b or any of the commentariat - Any speculation as to the connection to the Russian Oilagarck....you know, follow the money?
Scotch Bingeington , Dec 8, 2017 5:18:55 PM | 13
Maybe that canvas Jesus is meant to be a hostage one day, potentially.
terry tibbs , Dec 8, 2017 5:26:21 PM | 14
a simple question who gets the 100s of millions? who is the seller? the fake painting is cover for a payoff or tribute yes no maybe friends of kushner own the painting maybe it is to help kushner and his 666 moloch tower block mortgage. the bank of gorge soros must need some fund back quick for a new hungary regime change operation.

wahabbi is a tavistock british demented fiendish virus injected into islam for gang counter gang pseudogang hagel control

uae and the house of saud are donmeh jews
satanist hate jesus.
simply google talmud quotes about jesus and all will become clear.

Kabobyak , Dec 8, 2017 5:27:13 PM | 15
As to how the Jerusalem actions play out, the posting here (MOA) a couple of days ago was informative as to reasons and timing (including info about Sheldon Adelson's hundred million to Trump campaign). I do wonder...knowing that real or false-flag violence could ensue against Israeli or US targets, it could be a useful pretext for the US waging war in the ME against Hezbullah or anyone else we accuse. With our intelligence agencies providing the "evidence" and a compliant media to sell it, as usual a majority of Americans would support it.
Daniel , Dec 8, 2017 5:37:14 PM | 16
Great stuff, b et al. This Jerusalem declaration has me genuinely scared. Violence (real or false flag) could be the expected Reaction to this Problem, resulting in the long-planned Solution of finishing off MENA. If Russia is sincere in its alliance with Syria and Iran, and interest in a multi-polar world with self-determination for sovereign nations, this war could easily escalate to the End Timer's dreamt of Final Battle of Armageddon.

Most of the MSM coverage of Reactions I've seen name Muslim/Arab countries as opposing, and others as "concerned," even though almost all official state responses have denounced President Trump's® declaration. This "Clash of Civilizations" type narrative is not encouraging.

Flatulus , Dec 8, 2017 6:09:23 PM | 17
Terry Tibbs 14 - The family trust of Rybolovlev is the seller of the painting. Rybolovlev was also a buyer of Trump estate in Florida previously.
psychohistorian , Dec 8, 2017 6:22:05 PM | 18
@ Daniel ending with "This "Clash of Civilizations" type narrative is not encouraging." That is exactly what they want you to focus on as a narrative rather than the simple truth about the demise of private banking. On the previous thread about the Republican: Ryan deficit BS there was a commenter ex-SA with a John H. Hotson link that I want to see go viral because it simply explains the history of the Gordian Knot we face as a species

The link to a 1996 article: Understanding Money by John H. Hotson. The take away quote

"Banking came into existence as a fraud. The fraud was legalized and we've been living with the consequences, both good and bad, ever since. Even so it is also a great invention-right up there with fire, the wheel, and the steam engine."

Clash of Civilizations is as vapid a meme as the common understanding of the Capitalism myth as that article so clearly states. Spread his word far and wide to wake up the zombies. It is time!

terry tibbs , Dec 8, 2017 6:45:52 PM | 19

17
something stinks in trumptoon. really small world what are the chances A. whenever Donald Trump has left the White House and ventured anywhere, Dmitry Rybolovlev (aka the "Russian King of Fertilizer") has tended to show up in the same city. The latter possibility has long been bolstered by the fact that Trump sold Rybolovlev a mansion a few years ago that neither of them lived in nor cared about, suggesting the sale was mere cover for shifting money from Russia to Trump.

Deutsche Bank in Germany busted for laundering more than ten billion dollars out of Russia and into places like New York. This stood out because Deutsche has also loaned more than a billion dollars to Donald Trump, who just happens to be based out of New York.

james , Dec 8, 2017 6:56:26 PM | 20
thanks b.. fascinating.. i wait for the next shoe to drop.. it's coming... hopefully we get the back story on this sooner then later..

i would think the timing of Foreign Minster Adel al-Jubair being fired has something to do with all this.. he revealed something that he wasn't supposed to? i would also imagine those heavies still hanging at the saudi ritz carlton might be pulling some strings from behind the scenes? meanwhile mbz is doing a hell of a fine apprentice with mbs, lol..

nice pic in the post btw!! clown prince as savior of ksa, lol...

jezabeel , Dec 8, 2017 7:02:46 PM | 21
Belief in Jerusalem as the Jew capital is the same as belief in the intrinsic value of fiat currency, or the exceptionalism of the US. It's just mental illness. The Kingdom of God is within you, not in temples of stone and wood. We'd be better just cultivating our own personal relationship with our higher selves and leave the deluded to scrap it out over ash and sand. That said, if someone with a big nose came to my door and said my house was going to get knocked down because Shalom etc, that would be the day I would have to really figure out how to proceed without becoming the necessary victim in another's persecutor drama complex. I guess that's what Palestinians have to deal with every day. Horrible situation.

I heard a story once that when the British were throwing the Aborigines of Australia off cliffs en masse in their Australian version of the Middle East story of dispossession and demonization, the Aborigines would look up calmly at the officers as they fell and in their own language say: "You have a problem, bro". Sometimes death is better than becoming a victim. And as a worshiper of Lord Shiva the Destroyer, I wish you all completely liberating and renewing deaths from yourselves.

terry tibbs , Dec 8, 2017 7:08:16 PM | 22
probably nothing kosher burger. Russian Oligarch Rybolovlev Saved Trump Financially.
https://new.euro-med.dk/20170314-russian-oligarch-rybolovlev-saved-trump-financially-courier-of-the-tsar-putin-to-president-trump.php

Confirmed: Rybolovlev's Jet & Yacht were in Dubrovnik the same time as Ivanka and Jared Kushner

https://www.dailykos.com/stories/2017/3/17/1644558/-Confirmed-Rybolovlev-s-Jet-Yacht-were-in-Dubrovnik-the-same-time-as-Ivanka-and-Jarred-Kushner

elsi , Dec 8, 2017 7:20:02 PM | 23
But, has not The Donald declared that this media NYT, Bloomberg , etc...were all "fake news"? Then why is anybody going to trust them when publishing whatever?
Sounds quite clumsy, or simply, demential ( as every move of this administration ) to try to leak something through those media you have widely discredited during all your election campaign and beyond....

I, by a norm, do not trust any move coming from Trump could be for any good. This is, simply, "smoke and mirrors" and an intent of whitewashing a bit the already deplorable image of this admnistration in front of the world wide reaction in rejection of his bold and clumsy declaration of Jerusalem as capital of the Zionist regime.
The same for the clearly hypocritical call for to alleviate the suffering of the Yemeni people, just another intent of whitewashing when they are main puppet-masters in that war torn country, as it happens with every conflict in the world.

What it is beyond me is that the Russians, are always amongst those who swallow this theater plays....I wonder why....

In front of the demential way this administration makes fun of every event, people, country... in the world, in spite of the suffering they could inflict on them, I concur with Terry in that this just could be some esotheric issue more proper of unoccupied people with too much money to waste. Most probably something involving "Damian" Kushner, his 666,Madison Avenue penthouse and an occult message from The Messiah in the reverse of the canvas of that Jesus paint with a codified message on the results of the coming final battle of Armaggedon amongst the forces of evil and those of good, when Russia will be santified as the real Promised Land and The Saker will be ( finally! ) crowned as the saint he always claimed to be along with Saint Nicolas Romanov, and they will all eat sardinas together with the Trumps, the Kushners and the Netanyahus in Mar a Lago or in the super-yatch of Abramovich during the summer, but in winter they will go together to Sochi´s Putin dacha, since they love to meet super-intelligent, well educated, cool people....well, the elite of everything...

The surviving Arabs and the rest of us, plebeian ignorant clumsy sinners not so white as them, ( what they call "the sheeple", vaya )we will continue working from sunrise to sunset for crumbs, but, who cares? We will continue having good times with our peers and loved ones and laughing as usual with the little things of real life...Do not despair....

elsi , Dec 8, 2017 7:25:15 PM | 24
This is the real Christmas spirit of The Donald, alias Orange Agent Dotard : https://www.rebelion.org/imagenes/p_08_12_2017.jpg
elsi , Dec 8, 2017 7:44:26 PM | 25
The poster above was drawn by Basque artist Josetxo Ezcurra
Peter AU 1 , Dec 8, 2017 7:46:42 PM | 26
Western media called Putin unpredictable, but that was because he could see moves that others didn't see. Erdogan looked unpredictable and irrational while moving from the hedgemon to the multi-polar world. Trump? Like Erdogan, trying to move US to the multi polar world? Too many moves he makes puts sand in the hedgemon's gears.
elsi , Dec 8, 2017 8:15:30 PM | 27
For you to see that all this is not but theater, look what worries them most, meanwhile, in The Vatican: Pope Francis supports the idea of changing a phrase in the Lord's Prayer

[Dec 04, 2017] End of cheap oil will probably bring more wars as nations will try to get to remaning reserves

Notable quotes:
"... The fact is that the rise of the West to global dominance is due to a historical anomaly. It was fuelled (literally) by the discovery and harnessing of the chemical energy embedded in coal (late 18thC) and then oil (late 19thC). The first doubled the population, and as first movers gave the West a running start. The second turned on the afterburners, and population grew >3.5 fold. Again the West led the way. To fuel that ahistorical step-function growth curve, control of resources on a global scale became its civilizational imperative. ..."
Dec 04, 2017 | www.unz.com

@Vidi

From Patrick Armstrong's article (a good one, by the way):
A Russian threat is good for business: there's poor money in a threat made of IEDs, bomb vests and small arms. Big profits require big threats.
Actually, I'd say the Russian threat is necessary to keep the Europeans too frightened to protest while the U.S. steals wealth from them. After all, when the U.S. imports goods and "pays" for them with printed money, it is basically stealing those goods. The U.S. is draining a lot of wealth from Europe (like $150 billion a year), so something must be done to keep them docile. Russia's perfect for that.
@Erebus

"(Failed) West and a multipolar Rest". The latter is what I think will actually happen in the near and medium term.

I think we already have it, except I don't think West has failed yet. Or it has in a way, the process of failing goes on, but the consequences have not been felt much in the West yet.

Well, exogenous events aside, "decline and fall" is necessarily a process. A series of steps and plateaus is typical. A major step occurred in 2007/8, when the money failed. The bankers, in a frankly heroic display of coordination, propped up the $$$ and the West got a decade long plateau. Things are going wobbly again, financially speaking and I suspect the next step function to occur rather soon. Stays of execution have been exhausted, so it'll be interesting how the West handles it, and how the RoW reacts.
Europeans have been invited to join the Eurasian Project, to create a continental market from "Lisbon to Vladivostok". Latent dreams of Hegemony hold at least some of their elites back. The USA has also been invited, but its dreams remain much more virile. That is, until Trump who's backers seem to read the writing on the wall better than the Straussians.
I don't see any other power than the West (=US) aspiring to 'manage the world'....
The other 'powers' have very modest, regional aspirations... US seems to be obsessed with it.
The fact is that the rise of the West to global dominance is due to a historical anomaly. It was fuelled (literally) by the discovery and harnessing of the chemical energy embedded in coal (late 18thC) and then oil (late 19thC). The first doubled the population, and as first movers gave the West a running start. The second turned on the afterburners, and population grew >3.5 fold. Again the West led the way. To fuel that ahistorical step-function growth curve, control of resources on a global scale became its civilizational imperative.

That growth curve has plateaued, and the rest of the world has caught/is catching up developmentally. The resources the West needs aren't going to be available to it in the way they were 100 years ago. Them days is over, for everybody really, but especially for the West because it has depleted its own hi-ROI resources, and both of its means of control (IMF$ System & U$M) of what's left of everybody else's are failing simultaneously. So its plateau will not be flat, or not flat for long between increasingly violent steps.

The West rode an ahistorical rogue wave of development to a point just short of Global Hegemony. That wave broke, and is now rolling back out into the world leaving the West just short of its civilizational resource requirements. No way to get back on a broken wave. In any case, China now holds the $$$ hammer, and Russia holds the military hammer, and they've now got the surfboard. Both of them, led by historically aware elites, know that Hegemony doesn't work, so will focus on keeping their neck of the woods as stable & prosperous as possible while hell blazes elsewhere.


What is really going on is that West has over-reached and can barely handle its own problems.
IMHO, what's really going on is that the West's problems are simply symptomatic of what "decline and fall", if not "collapse" looks like from within a failing system. A long time ago I read the diary of a Roman nobleman who in the most matter-of-fact style wrote of exactly the same things Westerners complain about today. How this, that or the other thing no longer works the way it did. For all of his 60+ years, every day was infinitesimally worse than the day before, until finally he decides to pack up his Roman households and move to his estates in Spain. It took 170(iirc) more years of continuous decline until Alaric finally arrived at the Gates of Rome. If wholly due to internal causes, collapse is almost always a slow motion train wreck.
...

'there would be a vacuum' and 'Russians would move in'. This is obvious nonsense and only elderly paranoid Cold Warrior types believe it (peterAUS?).
Actually, it's just stupid. Cold Warrior or not, the view betrays a deep and abiding ignorance of both history and a large part of what drove the West's hegemonic successes. That both militate against anyone else ever even trying such a thing on a global scale can't be seen if you look at historical developments and the rest of the world through 10' of 1" pipe.

The idea that Russia wants/needs the Baltics is even more laughable than that it wants/needs the Ukraine or Poland. None of these tarbabies have anything to offer but trouble. Noisome flies on an elephant, it is only if they make themselves more troublesome as outsiders than they would be as vassals would Russia move.

[Dec 03, 2017] Carrying Capacity, Overshoot and Species Extinction by Ron Patterson

Notable quotes:
"... Carrying Capacity : Carrying capacity is a well-known ecological term that has an obvious and fairly intuitive meaning: "the maximum population size of a species that the environment can sustain indefinitely, given the food, habitat, water and other necessities available in the environment". Unfortunately, that definition becomes more nebulous the closer you look at it – especially when we start talking about the planetary carrying capacity for humans. Ecologists claim that our numbers have already surpassed the carrying capacity of the planet, while others (notably economists and politicians ) claim we are nowhere near it yet! ..."
"... Overshoot : When a population surpasses its carrying capacity it enters a condition known as overshoot. Because carrying capacity is defined as the maximum population that an environment can maintain indefinitely, overshoot must by definition be temporary. Populations ..."
"... to (or below) the carrying capacity. How long they stay in overshoot depends on how many stored resources there are to support their inflated numbers. Resources may be food, but they may also be any resource that helps maintain their numbers. For ..."
"... one of the primary resources is energy, whether it is tapped as flows (sunlight, wind, biomass) or stocks (coal, oil, gas, uranium etc.). A species usually enters overshoot when it taps a particularly rich but exhaustible stock of a resource. Like oil, for instance ..."
"... The zoomass of wild vertebrates is now vanishingly small compared to the biomass of domestic animals. In 1900 there were some 1.6 billion large domesticated animals, including about 450 million head of cattle and water buffalo (HYDE 2011); a century later the count of large domestic animals had surpassed 4.3 billion, including 1.65 billion head of cattle and water buffalo and 900 million pigs (FAO 2011). Calculations using these head counts and average body weights (they have increased everywhere since 1900, but the differences between larger body masses in North America and Europe and lower weights elsewhere persist) yield estimates of at least 35 Mt C of domesticated zoomass in 1900 (more than three times the total of all wild land mammals) and at least 120 Mt C in the year 2000, a 3.5-fold increase in 100 years (and 25 times the total of wild mammalian zoomass). And cattle zoomass alone is now at least 250 times greater than the zoomass of all surviving African elephants, which in turn is less than 2 percent of the zoomass of Africa's nearly 300 million bovines (Table 2). ..."
"... Carrying Capacity, Overshoot and Species Extinction ..."
"... let go/ get out ..."
"... until which time as I say otherwise ..."
"... until which time as I or you opt out ..."
Dec 03, 2017 | peakoilbarrel.com

11/29/2017 Notice: Please limit your comments below to the subject matter of this post only. There is a petroleum post above this one for all petroleum and natural gas posts and a non-petroleum post below this one for comments on all other matters.

First, let us define carrying capacity and overshoot. And none has done that better than Paul Chefurka .

Carrying Capacity : Carrying capacity is a well-known ecological term that has an obvious and fairly intuitive meaning: "the maximum population size of a species that the environment can sustain indefinitely, given the food, habitat, water and other necessities available in the environment". Unfortunately, that definition becomes more nebulous the closer you look at it – especially when we start talking about the planetary carrying capacity for humans. Ecologists claim that our numbers have already surpassed the carrying capacity of the planet, while others (notably economists and politicians ) claim we are nowhere near it yet!

Overshoot : When a population surpasses its carrying capacity it enters a condition known as overshoot. Because carrying capacity is defined as the maximum population that an environment can maintain indefinitely, overshoot must by definition be temporary. Populations always decline to (or below) the carrying capacity. How long they stay in overshoot depends on how many stored resources there are to support their inflated numbers. Resources may be food, but they may also be any resource that helps maintain their numbers. For humans one of the primary resources is energy, whether it is tapped as flows (sunlight, wind, biomass) or stocks (coal, oil, gas, uranium etc.). A species usually enters overshoot when it taps a particularly rich but exhaustible stock of a resource. Like oil, for instance

When we talk about carrying capacity we need to define exactly who or what we are carrying. Are we talking about humans, all animals or what? Well, let's just talk about terrestrial vertebrate biomass.

Okay, Vaclav Smil and Paul Chefurka (and the estimates of most earth biologists) are correct, the long-term carrying capacity of terrestrial vertebrate biomass is a little over 200,000,000 tons. But how do we know that amount is correct? Easily, because that is what it was for millions of years before the advent of agriculture and other things brought about by modern day Homo sapiens.

Plant and animal species all struggle to survive. In doing so they have evolved to fill every available niche on earth. If a plant can grow in an area, any area, it will do so. If an animal can find a habitat in any area on earth, it will do so. At least since the mid-Triassic, about 225 million years ago, plants and animals have occupied every available niche on earth. If any animal overshot its habitat, dieoff would soon correct that situation. So for many millions of years, the terrestrial vertebrate biomass remained at about two hundred million tons, give or take. I say that because climate change, sea levels rising and falling, continental drift would cause the long-term carrying capacity to wax or wane. Also, the estimate is just that, an estimate. It could be slightly higher or lower. But the long-term carrying capacity of the earth always remained at one hundred percent of what it was possible to carry.

Then about 10,000 years ago man invented agriculture. At first, this only enabled a slight increase in population. Soon only plants that produced the most grain, fruit or tuber per plant, or per area of ground, was selected for replanting. Genetic engineering goes back thousands of years.

Then they discovered fertilizer. Animal and human waste could greatly increase plant production. Animals were domesticated and the plow was invented. More food per area of ground could be produced. Then chemical fertilizers were invented and the population floodgates were opened. At first phosphates from bird guano dramatically increased agricultural production but around the middle of the last century nitrate fertilizers from the Haber Bosch process enabled the green revolution and enabled the population to expand three fold.

It's mostly cows, then humans, then pigs then chickens then Interesting that the biomass of chickens is ovwe three times that of all the wild animals combined. If this chart does not shock you then you are totally unable to be shocked by anything concerning the earth's biosphere.

The world population is still expanding at an alarming rate. By 1989 the population was expanding by about 88 million people per year. Then by the year 2000 population growth had slowed to about 77 million per year. Then the slowdown stopped and started to increase again. it stands at about 79 million per year according to the US Census Bureau.

Now they are saying it will start to slow. But that slowdown has not yet started. True, the fertility rate has been dropping but that has been offset by the increase in population. The fertility rate is dropping but on more and more people.

Notice the U.S. Census Bureau starts the slowdown at almost the exact date this chart was drawn, August 2017. If they had drawn this chart in 1995, then no doubt they would have started their prediction of constant decline in 1995.

But I have no doubt that the population will start to decline. It must, it must because we are destroying the ability of the planet to feed all its people.

Paul Chefurka created the above graph in May 2011. I think he was a little off. He has the world population hitting almost 8 billion then starting to drop around 2030.

I am more inclined to agree with the U.S. Census Bureau who thinks the world population will hit 9.4 billion around 2050. Then I believe the population will start to fall. The rate of population decline and how far it will fall is hard to predict. That will depend on many things but primarily on if and when globalization collapses. The collapse of globalization will bring about civil strife, border wars, and famine around the world.

I want to call your attention to the green, wild animal, portion of the second graph at the top of this post. Notice the wild animal portion of the terrestrial vertebrate biomass, by 1900, had dropped to about 20% of its historical value. Then by 2000, it had dropped to half that amount. Then by 2050, we expect that 2000 value to be cut in half again.

By 2100, it will very likely all be gone. Well, almost all gone. There will still be plenty of rats and mice and perhaps a few other small vertebrates will still survive, but all the large megafauna, except humans, will be gone. Gone forever or at least for the next million years or so. It will take that long for new megafauna to evolve after the human population has been greatly reduced to a billion or even a few million people.

But the far distant future is of little concern to us now. The sad fact of the matter is your descendants will live in a world completely free of wild megafauna. There is no way to avoid that fact now, it is already too late to stop the destruction.

WHY?

Yes, why? Why are we destroying the earth's ecosystem? Why are we driving most all wild animals into extinction? Why have we dramatically overpopulated the planet with human beings? Why did all this happen? However, when you ask why, you are implying that all this had a cause, that someone or some group of people are to blame for this damn mess we have gotten ourselves into.

Was it the early farmers who invented agriculture. Or was it the early industrialists like James Watt or Thomas Edison? Or was it Fritz Haber and Carl Bosch, are they the villains that got us into such a damn mess? No, it was none of these people. It was no one person or no group of people. It was not even any revolution like the industrial revolution, the medical revolution or the green revolution. There is no one to blame and there is nothing to blame.

Agriculture enabled the very small early population to expand. The industrial revolution and later the green revolution enabled more people to be fed. The medical revolution enabled more babies to survive and people to live much longer. Our population has exploded simply because it could. We have always lived to the limit of our existence and we always will. It was just human nature pure and simple.

Now many will say that we are now controlling our population, that we have learned how to limit our fertility rate. Well, yes and no. Reference the below chart and table that were produced by the Population Reference Bureau in 2012.

In the developed world, where most of the world's energy is consumed, we almost have zero population growth. But in the less developed world, the population is still growing.

Here is the perfect example of what is happening, what is still happening , in much of the world. Notice the difference in the infant mortality rate and the annual infant deaths. Most of the world's people are still living at the very limit of their existence.

<sarc>But not to worry. The death rate is rising, babies are dying, the population will soon start to fall in the undeveloped world. </sarc>

Note: The Paul Chefurka graphs in this post were created, primarily, with data from the research of Vaclav Smil and is published in this 24 page PDF file: Harvesting the Biosphere: The Human Impact . The file includes over 2 pages of notes and 4 pages of references where Smil sources and documents every stat he quotes. Below are a table and some text from the paper.

The zoomass of wild vertebrates is now vanishingly small compared to the biomass of domestic animals. In 1900 there were some 1.6 billion large domesticated animals, including about 450 million head of cattle and water buffalo (HYDE 2011); a century later the count of large domestic animals had surpassed 4.3 billion, including 1.65 billion head of cattle and water buffalo and 900 million pigs (FAO 2011). Calculations using these head counts and average body weights (they have increased everywhere since 1900, but the differences between larger body masses in North America and Europe and lower weights elsewhere persist) yield estimates of at least 35 Mt C of domesticated zoomass in 1900 (more than three times the total of all wild land mammals) and at least 120 Mt C in the year 2000, a 3.5-fold increase in 100 years (and 25 times the total of wild mammalian zoomass). And cattle zoomass alone is now at least 250 times greater than the zoomass of all surviving African elephants, which in turn is less than 2 percent of the zoomass of Africa's nearly 300 million bovines (Table 2).

Please comment below but only on the subject matter of this post.

This entry was posted in Uncategorized and tagged Megafauna Extinction , Overpopulation , Overshoot , Peak Oil , Population Explosion , Species Extinction . Bookmark the permalink .

295 Responses to Carrying Capacity, Overshoot and Species Extinction

George Kaplan says: 11/29/2017 at 8:23 am

Great summary. Mainly so I don't have to think about all the depressing aspects: do you not think if humans disappeared but even a few of our larger domesticated animals survived that evolution could go bonkers and we'd have new familes and species springing up all over in far less than a million years. After all homo sapiens are only a few hundred thousand years, and dogs (admittedly still technically wolves) only a few thousand. It would depend a bit whether we left much of the planet that was actually habitable of course – i.e. there'd need to be plenty of evolution pressure, but not too much. I guess your point would be we'd get new species but not the mega fauna, but I think there's evidence that isolated small islands can lead to either pygmy species or giants depending on the exact environment.
Ron Patterson says: 11/29/2017 at 9:28 am
George, I would have to start by saying that humans are not going to disappear. Other than extinction via natural disaster, like a giant meteorite hitting the earth, species are driven into extinction. That is they are outcompeted for territory and resources. Humans are the drivers of extinction, no species will drive us into extinction. We occupy every habitable niche on earth and will likely continue to do so even after our numbers have been dramatically reduced.

If we have a collapse of globalization, and I believe that is inevitable and will happen within the next one hundred years, then the human population will be devastated by civil strife, border wars, and famine. Seven to nine billion hungry people will be a disaster for all other animal life, domestic as well as wild. So I do not believe there will be enough domestic animal life to kick-start evolution of new wild species of megafauna. As I have said before, we will eat the songbirds out of the trees. So there sure as hell will not be any cows left.

Okay, so perhaps it will not take a million years for other large megafauna to evolve. Perhaps it will only be in the hundreds of thousands of years.

The Cunning Linguist says: 11/29/2017 at 10:18 am
So, after we eat the songbirds from the trees, what the hell will we eat then?

Is it not possible that the human species will drive itself to extinction because we are so successful at destroying the natural environment which we depend upon for our survival?

After industrial civilization collapses, the great human die-off will rapidly reduce human numbers by more than 90%. Life for the remaining humans will be extraordinarily hard. If the overall stress level is high enough, it will be very difficult for humans to raise enough offspring to reproductive age to maintain the species over time. Biologists call this pre-extinction phase die out. Once a species numbers fall below replacement level, they go extinct.

And what the hell do you mean: "If we have a collapse of globalization, and I believe that is inevitable and will happen within the next one hundred years "? Within the next 100 years? You are dreaming! We are in the early stages of apocalypse right now! Rapid die-off will begin within the next few years. 100 years from now, there will be no one alive who will remember it.

Ghung says: 11/29/2017 at 10:44 am
Cunning said; "After industrial civilization collapses, the great human die-off will rapidly reduce human numbers by more than 90%." ..

..while what is left of nature will rapidly move into the niches vacated by species humans have wiped out. If (big if, maybe) there are remaining reproductively viable human populations, they will exploit those recovering niches at rates which will be far below the astounding rates of exploitation during the industrial age. Where humans have abandoned their schemes of destroying the natural world for their own purposes, nature, in some form, recovers quite quickly.

On the other hand, if global warming goes off the scale (ala Guy McPherson, et al), all bets are off. Everything larger than a shrew will be toast.

Ron Patterson says: 11/29/2017 at 10:59 am
Once a species numbers fall below replacement level, they go extinct.

The replacement level for animals in the wild and the replacement level for domestic animals are two different things entirely. For animals in the wild, the replacement level may be several hundred to several thousand. Animals in the wild have to find each other in order to reproduce. For domestic animals, the replacement level is two.

In this regard, we Homo sapiens are far more like domestic animals than wild animals. An example would be the Polynesians who migrated to distant islands in sailing outrigger canoes. Their numbers, in those canoes, likely numbered only a dozen or so. Yet huge numbers eventually sprang from tiny numbers.

Yes, stress during periods of great strife and famine will be great. Stress will likely take a great toll. But there will always be survivors. Everyone is not equally affected by stress. Some can overcome, some cannot. It is a little like a plague or disease. There are always some who are immune or otherwise escape the problem.

As for rapid die-off coming within a few years, yes that may happen but I doubt it. Humans societies are far more resilient than you might expect. For instance, look at Somalia, or Venezuela. Somalia, a failed state, has been in turmoil for decades yet no massive die-off has occurred. Venezuela is in a state of almost total anarchy, yet no massive die-off as of yet.

I believe the die-off will start within the next hundred years. Next week is within the next hundred years. But I doubt it will happen by then, or even within the next few years or so. In my opinion, it will take several decades for things to really fall apart.

The Cunning Linguist says: 11/29/2017 at 12:01 pm
Ron,

You said:
"But I doubt it will happen by then, or even within the next few years or so. In my opinion, it will take several decades for things to really fall apart."

What about Limits to Growth? That study forecast that real problems would begin in the first or second decade of the 21st century, in other words, now. Why is Limits to Growth wrong? How do we avoid sudden, catastrophic collapse once world economic growth comes to an end?

What about the fragile, debt ridden financial/credit/monetary system? Have you read the Korowicz paper? How will industrial civilization gradually unwind over many decades when the world economy freezes very suddenly and food stops arriving at the grocery stores? That should lead to a very rapid die-off as every city suddenly becomes uninhabitable.

Ron Patterson says: 11/29/2017 at 12:27 pm
What about Limits to Growth? That study forecast that real problems would begin in the first or second decade of the 21st century, in other words, now. Why is Limits to Growth wrong?

Hey, I have a copy of Limits to Growth right here in my hand. On what page do they predict catastrophic collapse before 2050. Help me out here but I just can't seem to find it.

As to real problems, hell yes, we are having real problems right now. We have been having real problems in Venezuela and a lot of other places. But there is a tremendous difference between real problems and catastrophic collapse.

And what about all the other terrible things you are say are happening right now. Hell yes, they are happening and they are terrible. But they have not yet led to catastrophic collapse. But it is very likely they will lead to collapse in three or four decades from now.

Ghung says: 11/29/2017 at 12:37 pm
The LTG graphs appear to show economic and industrial peaks @2025-2030, if not sooner, dropping off quickly.

https://i.guim.co.uk/img/static/sys-images/Guardian/Pix/pictures/2014/9/1/1409550981593/cc68cfc8-072c-4e53-a741-b28c3d6bcea3-573×1020.jpeg?w=620&q=55&auto=format&usm=12&fit=max&s=1ec7d319d599211c6d4adb5d287cced8

Ron Patterson says: 11/29/2017 at 12:59 pm
Ghung, what page is this on?
Ghung says: 11/29/2017 at 1:17 pm
It's actually from a Guardian article, taken from Bardi's "The Limits to Growth Revisited". I don't know what page the original graph was on, but I have a copy of the original 1972 graph which shows the same curves, without the more recent data curves.

Guardian article "Limits to Growth was right. New research shows we're nearing collapse" :

https://www.theguardian.com/commentisfree/2014/sep/02/limits-to-growth-was-right-new-research-shows-were-nearing-collapse

George Kaplan says: 11/29/2017 at 1:17 pm
Ron – that graph is from the Graham Turner LtG update: http://sustainable.unimelb.edu.au/sites/default/files/docs/MSSI-ResearchPaper-4_Turner_2014.pdf
Ron Patterson says: 11/29/2017 at 1:32 pm
Shit? Is this real? I had no idea that we might be this close to collapse.

Nevertheless, I just can't believe we are that close. I think it will be at least 20 to 30 years from now.

George Kaplan says: 11/29/2017 at 1:43 pm
It depends on what you call collapse. The UK and USA are both following the curve such that life expectancy is starting to decline. I think industrial productivity might be going the same way in UK, and definitely our health and old age care systems (which is one of the measures he uses for "services") are in decline (though the government always finds a way to massage the numbers so far). One of the authors of LtG has said that once one of the main curves is definitely through an extrema then the models probably don't work any more – which I took to mean possible accelerating chaos, but might mean something else.
Hightrekker says: 11/29/2017 at 7:37 pm
Shit? Is this real? I had no idea that we might be this close to collapse.

Yep -- -
Population overshoot, ecocide, environmental destruction, deforestation, ocean acidification, mass loss of pollinators–
I could go on --

It doesn't take a weather man to tell which way the wind blows.

Alice Friedemann says: 11/29/2017 at 8:02 pm
This a unique, one-time only collapse because we never relied on fossil fuels in the past, and we certainly won't in the future. If you look at energyskeptic/3) Fast Crash, you'll see the many reasons I think collapse will unfold quickly. Turchin, who has looked at the patterns of collapse in civilizations going back to Mesopotamia, says it takes about 20 years on average. That is in line with Hook's estimate of a 6% exponential decline, which is the rate at which the 500 giant oil fields decline on average after peaking (something like 270 of them last I checked), all others (offshore, shale, smaller, and so on) decline much faster, hence Hooks estimate of an exponential increase of .0015 a year as non-giants increasingly contribute to what's left of production (giants are now 60% of world oil production). If Hook (2009) is right, that means we'll be down to 10% of what we produce after global peak production in 16 years. At that point, even if governments are rationing oil wisely to grow and distribute food, you're reaching the breaking point. Oil makes all other resources possible, so although many resources reaching their limits, the decline of oil will be the true beginning of the end. No more pumping water from the Ogallala 1,000 feet down, going 10,000 miles on factory farm fishing boats, and so on. Oil is masking how incredibly far we are over overshoot. Above all, 99% of the supply chain transport – trucks, rail, ships – depends on oil. 80% of communities in the U.S. depend entirely on oil, by far the least efficient mode of transportation of the three. Well, it is too big a topic to cover in a comment. I have a lot more to say in my book "When Trucks Stop Running".

Oh, and when I heard Dennis Meadows speak at the 2006 Pisa Italy ASPO conference, he said that if anything Limits to growth was head of schedule, with collapse starting as early as 2020. We'll see, too many factors. Also in the past, nations avoided collapse way past their carrying capacity by trading or conquering other nations, like the Roman Empire, which had to import food from Carthage and Egypt, no way to grow enough food in Italy.

Hook, M., Hirsch, R., Aleklett, K. June 2009. Giant oil field decline rates and their influence on world oil production. Energy Policy 37(6): 2262-2272
https://www.diva-portal.org/smash/get/diva2:225443/FULLTEXT01.pdf

OFM says: 11/30/2017 at 7:14 am
Hi Alice,

I'm hoping to see more comments from you in the future, and not just in this one thread, lol.

It's very common for experts in any given field to presume there are none in other fields that are capable of solving the problems they see as civilization killers.

There are no guarantees of success, but success is possible when it comes to finding and implementing solutions to problems such as the eventual depletion of oil.

Once the shit starts hitting the fan pretty hard and fast in terms of declining oil supplies, both good and bad things will happen on a scale that will take the breath away.

The bad will unquestionably include economic collapse across large swathes of some and maybe most societies.

The good will come in the form of action on the part of awakened LEVIATHAN, the nation state. Those of us who cannot see that once LEVIATHAN stirs and focuses on such problems as we FORCED to deal with soon have little understanding of history , human nature, and technology.

Now WHETHER , or NOT, Leviathan, Uncle Sam, John BULL, the Russian BEAR, et al, can do enough to keep the wheels on and turning, instead of falling off, is an open question.

I believe they can, depending on how far gone things are once they begin to come to grips with the various troubles that will threaten their existence.

People CAN AND DO come together, and work together, sometimes. Consider the case of the USA. We were mostly all isolationists the day before Pearl Harbor, but within a couple of days after, we were all ready to to go flat out to murder our enemies on the grand scale, and DID.

Neither I nor anybody else can prove either way whether we WILL work together well enough to prevent outright collapse meaning we die hard deaths by the tens of millions even here in a country such as the USA.

There's no question that we CAN work together, once we realize we must. Whether we get started soon enough is probably going to determine just how bad things will get in economic terms.

But between what scientists and engineers can do for us, by way of providing us with better tools, and what we can collectively do for ourselves by way of collective action, there's a real possibility that some countries will pull thru ok, no longer sleek and lazy and fat and wasteful, but at least still functional, and with most of their populations still alive and leading a reasonably dignified life style.

I will have more to say about what Leviathan awakened, scared and enraged can do later on, way down thread someplace within the next few days, by relating some historical examples.

Survivalist says: 12/02/2017 at 8:22 pm
I too feel that one day the trucks will stop running. It will be a very interesting transition to observe. I imagine it will have a progression that goes something like this:
-trucks running will increase in cost as will the things that they are running about with inside them.
– trucks will run to less and less places.
-trucks will run to less and less places less frequently.
-trucks will run only very rarely and only for high priority reasons.
-trucks will stop running altogether.

As this process takes place I imagine there will be measures taken to fill some of the void, where and when it is possible to do so.

George Kaplan says: 11/29/2017 at 12:57 pm
Ron – do you think humans will still be around in a million years or even a hundred thousand? If they are I think it will only be because they have made themselves irrelevant to the environment (i.e. small in numbers and having found a way to live sustainably) and other species will be evolving without too much human involvement.
Ron Patterson says: 11/29/2017 at 1:59 pm
Yes, George, I think humans will be around in a million years. Not nearly as many as are around today however. If I had to guess, and I do have to guess, then I would guess around 10 to 15 million humans would be around a million years from now. That would be one person alive then for every 500 alive today.

Of course, all fossil fuel would be gone and everyone would live off the land.

But if you doubt human survival, then just what do you think will wipe everyone out? What will bring the human population to zero?

George Kaplan says: 11/29/2017 at 2:26 pm
That sounds as good a guess as any. Part of my point was that they could only survive if they were not intrusive, and therefore would not be an impediment to evolution of other mega fauna. I think average species life time is estimated at around 1 to 2 million years, homo is a family rather than a species so the sapiens could go and something else come along, like we took out the Neanderthals. On the other hand if the bottlenecks get small enough in different locations we could just be whittled away by different causes.
Ron Patterson says: 11/29/2017 at 2:52 pm
I think average species life time is estimated at around 1 to 2 million years,

The point is George, Homo sapiens is not an average species. If we were an average species we would still be competing with other species for food and territory, losing some of those battles and winning others. But our numbers would be kept in check by our success and failure of that struggle, just like every other average species.

Our dominance has overwhelmed all other species. Like a plague, we are killing them all off. There is nothing average about us as a species.

George Kaplan says: 11/29/2017 at 2:59 pm
Ok, but our numbers were kept in check and we were competing like that for almost all of our history, until the Holocene interglacial came along and we decided agriculture was a good idea, or maybe we had a go before and it never took in a less stable climate. But before that there is evidence of some pretty tight bottlenecks when we were almost gone either locally (e.g. in India) or globally. And things like the Roman empire collapse suggest we can forget any kind of technological advantages in a couple of generations.
Ron Patterson says: 11/29/2017 at 3:11 pm
You lost me. I don't understand your point.

But since our brains to a degree where we could create stone tools and use fire, our population has been on a slow increase, bottlenecks notwithstanding.

What has made us not average is our brains, our mental ability. That is the one thing that has given us a huge advantage over all other species.

We are smart enough to wrestle all the world from every other species that stood in our way. If another species had something that we wanted, including even their flesh, we got it. We are smart enough to dominate the world, but not smart enough to see that we are destroying it.

George Kaplan says: 11/30/2017 at 11:23 am
My point is that unless we find a niche in which we can exist sustainably despite our intelligence and ability to get whatever we want and dominate the world, then we won't survive very long, and may not even then.
Dennis Coyne says: 11/30/2017 at 12:31 pm
Hi Ron,

I think some (you for example) are smart enough to see that we are destroying our World.

It may not be a majority view, though I think the numbers are increasing.

I would agree that we so far have not demonstrated that we are smart enough to change what we are doing (reduce the rate that we destroy the planet as rapidly as possible to zero (or negative, by which I mean restore the planet closer to a natural or sustainable state).

This may never be accomplished, but we cam move in that direction while reducing our numbers and our impact.

Des Carne says: 11/30/2017 at 1:02 pm
What it is about our brains that makes us not average is our capacity to deny reality. The mind over reality transition (Varki &Brower) is arguably what gave "sapiens" the advantage, successful but apparently impossible risk taking, to do away with neanderthalensis. In small scale hunter bands surrounded by magafaunal predators, denial of reality is a decided advantage, but in mass societies with the capacity to produce mass belief in non-realityy, it is the disadvantage that could do us in. Although not experimentally demonstrable, the idea that this mind over reality transition was an evolutionary event in the hominid genus 100-200 thousand years ago is a plausible explanation for sapiens' dramatic cortical development and the development or consolidation of female sexual selection, not present in our forebears or current great apes.

In a future world scratching a living as we did for most of our history as hunter-gatherer bands, but from a depleted world absent of any predators, we might evolve the ability to believe reality, without sacrificing cortical development. The first inhabitants of my country (Australia) managed to get by fot 60,000 years by killing off the megafauna. They were helped by climate change which dessicated the continent, but hung in there making it an extremely attractive aquisition by my ancestors when they came along.

OFM says: 11/30/2017 at 7:26 am
Hi Ron,

In broad terms, I agree with what you are saying here.

"Our dominance has overwhelmed all other species. Like a plague, we are killing them all off. There is nothing average about us as a species."

But we aren't doing any better than rats or fire ants, lol.

You're dead on about humanity not being an average species. We will be around at least until some other species capable of wiping us out evolves, and it's unlikely that we will ALLOW such a species to exist, unless it's a microbe and we can't wipe it out.

If chimps were to evolve just a little further along the lines of using tools and being able to communicate and work together, and started attacking humans, numerous humans armed only with primitive weapons such as fire and bows and arrows would kill every last chimp, and they wouldn't lose any time in doing so.

This brings up an interesting question. We know chimps use stone tools as hammers to break nuts, etc, , and that they fight ORGANIZED fights to the death sometimes.

Is there any evidence they are using stones as weapons . YET?

Ron Patterson says: 11/30/2017 at 7:38 am
No, chimps do not use stones as weapons but they do use sticks to flail another chimp with.

Chimps will not evolve much further if any. Their numbers are dropping like a rock. They will all be gone in 20 or 30 years.

Survivalist says: 12/02/2017 at 8:27 pm
I once heard an interesting story about chimps. Might have been in one of Pinker's books, I can't recall.

If you hang a bunch of bananas from the ceiling that a chimp cannot reach and you leave an A-frame ladder laying on the ground the chimp will set the ladder upright and get the bananas.
If you do the same thing with 2 chimps and a ladder so heavy that one chimp alone cannot set it upright, but 2 chimps working together could set it upright, they'll never get on the same page, so to speak, and cooperate in setting up the ladder. They will both try individually and fail. The bananas will never be reached.

Dennis Coyne says: 11/30/2017 at 12:46 pm
Hi Ron,

The charts in your post suggest about 1 billion might work, I would say 500 million would be my guess, not sure where you come up with 10 to 15 million.

Note that 500 million is roughly the World population in 1550 CE.

Just a different guess as I think a sustainable society could be reached by 2300 at these lower population levels, though perhaps fertility levels will remain below replacement over the long term so population will continually decline eventually some optimum will be determined and fewer than two children will not be encouraged.

Fred Magyar says: 11/29/2017 at 3:47 pm
Humans, that is Homo Sapiens per se, maybe not. Don't forget Cro-Magnons probably caused the extinction of Homo Neandertalis in about 40,000 years or so ago. Some other future species of the Genus Homo, very likely will be around for another million or so years. This is what I think they might look like. Maybe they will be called Homo technoligicus implantabilis, feel free to call them whatever you want. In any case resistance will be futile and you will be assimilated. 😉
Cheers!
.

robert wilson says: 12/01/2017 at 12:23 am
http://www.eindtijdinbeeld.nl/EiB-Bibliotheek/Boeken/The_Next_Million_Years__how_to_kill_off_excess_population___1953_.pdf
Nathanael says: 11/29/2017 at 4:18 pm
First of all, Ron, a species which destroys its own food supply or its own habitat *does* go extinct. They're currently referred to as "superpredators" -- it's happened repeatedly throughout history.

Second, regarding population growth, my primary charity for 20 years has promoted sex ed, access to contraceptions, and education of women worldwide. We know how to halt and reverse population growth in the "underdeveloped world". It's not difficult except for the religious groups which oppose contraception and oppose women's liberation.

Often the same religious groups who promote burning of fossil fuels. And deforestation.

Basically, whether humans survive depends on whether we defeat those groups, IMO.

Countries like Cuba which are very underdeveloped but essentially *lack* those religious groups (thank you Godless Communism!) they're doing OK on population stabilization.

Dennis Coyne says: 11/29/2017 at 5:15 pm
Hi Nathaneal,

There are countries that are religious such as Iran that have seen rapid demographic transition (15 years for TFR to go from over 5 to under 2). Also non-communist nations such as South Korea saw rapid transitions.

I agree education and gender equality as well as access to modern contraception are helpful.

Electrification will also help.

OFM says: 11/30/2017 at 7:46 am
Thank you Dennis,

Religion has it's points, as Twain used to put it, both good and bad. Preachers and priests have a way of figuring out what is in their own best interests, short term, medium term, and long term.

There are some religions or cultures, which are not necessarily one and the same thing , that do encourage or more or less actually force women to bear lots of children.

I come from a culture that is very often ridiculed here in this forum, which doesn't bother me at all personally. It's ridiculed on such a broad scale that it's hard to find a public forum peopled with technically well educated people where ridicule isn't the NORM.

As religion goes, my own personal extended family is about as religious as they come in the USA. My nieces and nephews and third cousins, the children of my FIRST cousins, are having kids at less than the necessary 2.1 rate needed to maintain our blood lines, lol. My informal seat of the pants estimate is that the extended family birth rate is down to somewhere around one point five.

It's well known that the birth rate in some countries that are supposedly Catholic has fallen like a rock over the last couple of decades.

And while I can't prove it, it's my firm opinion that once the priesthood in any country comes to understand that it's own long term interests are best served by encouraging small families, small families WILL BE ENCOURAGED. That may not happen for another generation or so, and it may not happen at all in some countries, if there is no top down control of the culture and religion.

Priests and preachers don't exist to serve GOD, or any combinations of gods, etc. They exist because they have found a way to provide a secure and relatively easy way of living largely off the work of their followers.

This is not to say their followers don't get back as much or more as they contribute. Every society has to have leaders, and priests and preachers can be and have often been very effective leaders. Some of them are effective leaders today.

Ron Patterson says: 11/29/2017 at 5:41 pm
First of all, Ron, a species which destroys its own food supply or its own habitat *does* go extinct. They're currently referred to as "superpredators" -- it's happened repeatedly throughout history.

Really, I have never heard of that. The only superpredator I ever heard of are human beings. But if you can give an example of a species destroying its own food supply and habitat, please enlighten me.

Survivalist says: 12/02/2017 at 8:31 pm
Humans on Easter island is the only thing that comes to my mind when thinking of such an example. I'm no expert on Easter island, however I understand people there did not go extinct, and that there was a small group living there when the island was found by Europeans. Again, not terribly well informed about that particular bit of history.
Kathy C says: 12/02/2017 at 5:20 am
When things begin to collapse the grid infrastructure will collapse. Coal factories in China and elsewhere will shut down and dimming will end. James Hansen estimated that warming may be held back by 50% by dimming, so we can expect warming to shoot up. http://www.columbia.edu/~jeh1/mailings/2013/20130329_FaustianBargain.pdf

When the grid collapses the nuclear power plants will no longer be able to be cooled. We know what happens then. This article addresses that happening from solar flares or emp attack but of course the failure of the grid from civilization collapse would do the same thing http://www.truth-out.org/news/item/7301-400-chernobyls-solar-flares-electromagnetic-pulses-and-nuclear-armageddon

With collapses of civilization their will be no remediation of forest fires. Chemical and Nuclear Dumps will burn as well as the nuclear power plants that have gone Fukushima.

A very underappreciated study is that of decaying leaves around Chernobyl While horses and other wildlife might now roam around Chernobyl the implications of leaves not decaying is enormous. "However, there are even more fundamental issues going on in the environment. According to a new study published in Oecologia, decomposers -- organisms such as microbes, fungi and some types of insects that drive the process of decay -- have also suffered from the contamination. These creatures are responsible for an essential component of any ecosystem: recycling organic matter back into the soil. Issues with such a basic-level process, the authors of the study think, could have compounding effects for the entire ecosystem."
Read more: http://www.smithsonianmag.com/science-nature/forests-around-chernobyl-arent-decaying-properly-180950075/

To just state that humans wouldn't disappear is nothing more than an assertion, as is stating that they would certainly disappear. However what faces humans is much more daunting than just the chaos of civilization collapse. Those who survive everything else will have a hard time reproducing with all that radiation around https://chernobylguide.com/chernobyl_mutations/

Of course long before civilization collapses the countries of the world may well play out the scenario that Richard Heinberg describes – Last Man Standing. Sound like politics today?

Survivalist says: 12/02/2017 at 8:34 pm
I suspect someone will bulldoze the nuclear power plants into the ocean before they let them melt down on land. Just a WAG.
Fred Magyar says: 11/29/2017 at 9:13 am
I posted this as a reply to a comment by GF a few threads back.

I highly recommend the following three ASU Origins Project debates and panel discussions to get a good feel for the big picture. It might take up a good four hours or so of your time. This isn't something suitable for sound bites. It involves a lot of in depth cross disciplinary knowledge.

https://origins.asu.edu/events/great-debate-transcending-our-origins-violence-humanity-and-future
Great Debate: Transcending Our Origins – Violence, Humanity, and the Future

https://origins.asu.edu/events/great-debate-extinctions-tragedy-opportunity
Great Debate: Extinctions – Tragedy to Opportunity

https://origins.asu.edu/events/conversation-inconvenient-truths-love-extinctions
Conversation: Inconvenient Truths – From Love to Extinctions

Maybe we are all royally fucked already but I also recommend E.O. Wilson's book 'Half Earth'.

Cheers!

Tom Welsh says: 11/29/2017 at 9:38 am
"Why did all this happen? However, when you ask why, you are implying that all this had a cause, that someone or some group of people are to blame for this damn mess we have gotten ourselves into".

I would like to suggest, respectfully, that this wording is the wrong way around. The essence of the problem is that no one has been in charge, no one has taken responsibility – and that is hardly changing at all.

The world is teeming with governments, corporations, NGOs, and "leaders" of all kinds. But what are all those leaders, and their estimable organizations, really trying to do? Some are aiming to earn as much money as possible. Others are trying amass as much power as possible. Most of their programmes have a lot to do with gaining more money and power – which become interchangeable at a certain point (as can be seen from a study of the US Congress, for example).

An intelligent alien visitor to our planet would reasonably conclude that, although individual humans are intelligent to various degrees, the human species as a whole is profoundly unintelligent. It has ample means of diagnosing what has happened, is happening, and will happen. Yet, because it has never developed any organ comparable to the individual's conscious brain, it does nothing about the obvious threats it faces.

Ron Patterson says: 11/29/2017 at 10:34 am
Tom, I think my wording was correct, you just did not quote all of my explanation. You wrote:

The essence of the problem is that no one has been in charge, no one has taken responsibility

No one can take responsibility because no one is in charge of the human race. And as far as being "profoundly unintelligent", I think that is an unfair charge. Having a blind spot in our DNA does not imply that we are unintelligent. The human race has never been faced with such a dilemma before. Our brains evolved to its present state during our hunter-gatherer days. We are molded by evolution to do everything possible to survive and reproduce. There is nothing in our DNA that tells us to protect the biosphere because the lives of our grandchildren depend upon it. So we don't.

What is happening is just human nature. That's all.

Joe Clarkson says: 11/29/2017 at 1:20 pm
What is happening is just human nature.

Evolution has resulted in all species, including humans, having a biotic potential that is greater than the carrying capacity of the niches in which they live. Populations are limited by resource limits and predation, not by self restraint or mutual agreement.

It would have been very unusual, perhaps unique in evolutionary history, for humans to have deliberately limited our population, even though it might have been theoretically possible due to our 'intelligent' ability to foresee our probable future. Despite Malthus, Limits to Growth and many other warnings, no realistic attempt has been made to remain below carrying capacity.

As you note, a massive die-off is inevitable, the only real question is when. Like The Cunning Linguist, I personally think it will be whenever people lose confidence in the global monetary system, as in Korowicz's "Trade Off: Financial system supply-chain cross contagion – a study in global systemic collapse". Once money stops flowing so does the food supply.

Dennis Coyne says: 11/29/2017 at 5:10 pm
Hi Joe,

What would cause this rejection of the monetary system? I don't follow the argument. Everyone decides at once that money is no longer a reasonable medium of exchange. Didn't happen during any financial crisis so far, people couldn't access their money at Banks after the 1929 crash, but this was less of a problem in OECD nations during the GFC.

The ETP nonsense is just that, anyone who knows their thermodynamics knows that theory is full of holes.

Joe Clarkson says: 11/29/2017 at 9:29 pm
Didn't happen during any financial crisis so far

No, but we did come close in 2008. All sorts of debt instruments including commercial paper, CDOs (the root of the problem), many derivatives and letters of credit all froze up. Without prompt dramatic action by the central banks and the US Treasury, the financial system could have collapsed. Nobody knew who was solvent or insolvent, so the central banks had to backstop every financial institution. All this over some mortgage securities based on the US housing market.

Now imagine that growth has turned to continuous worldwide economic recession, the inevitable fate of the global market economy in the face of energy and resource depletion ( it will happen despite the stupidity of the Hill's Group). Unemployment increases year after year and tax revenues continuously fall. Every kind of debt instrument, from sovereign debt to mortgages, to municipal and corporate bonds is more and more likely never to be repaid. Defaults are increasing with greater and greater frequency. The equities of every company become suspect as more and more companies go under.

Sooner or later, a critical mass of people are going to realize that most debts can never be repaid and are therefore worthless as assets. Since almost all money is created from debt, almost all money becomes worthless.

The only thing that makes money work is confidence in its value. When confidence in money (debt repayment) fails, the monetary system fails and without a monetary system, the global market fails.

Billions of lives are dependent on that market functioning smoothly every day. When it fails to function, people will die. I fully expect to lose every financial asset I own at some point, that's why I am preparing to live without money. Unfortunately, most people in the developed world can't do that, though they should be trying to do so with utmost urgency.

I admit that if there were a concerted international effort to declare a debt jubilee and start all over with a new world currency, some form of monetary system might continue after the present one collapses, but I really doubt that creditor countries and debtor countries are going to cooperate with the rapidity and solidarity needed to manage such a transition.

And even though all the productive assets in the world would still continue to e